Income Tax Assessment Act 1997
Act No.38 of 1997 as amended
This compilation was prepared on 1 January 2008
taking into account amendments up to Act No.184 of 2007
Volume 4 includes: Table of Contents
Sections1241 to 152430
The text of any of those amendments not in force
on that date is appended in the Notes section
The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section
Chapter3—Specialist liability rules
Part33—Capital gains and losses: special topics
Income Tax Assessment Act 1997 cxciii
Contents
Chapter3—Specialist liability rules i
Part33—Capital gains and losses: special topics i
Division124—Replacementasset rollovers 1
Guide to Division124 2
1241 What this Division is about 2
1245 How to find your way around this Division 2
Subdivision124A—General rules 2
12410 Your ownership of one CGT asset ends 3
12415 Your ownership of more than one CGT asset ends 4
Subdivision124B—Asset compulsorily acquired, lost or destroyed 6
When a rollover is available 6
12470 Events giving rise to a rollover 6
12475 Other requirements if you receive money 8
12480 Other requirements if you receive an asset 9
The consequences of a rollover being available 10
12485 Consequences for receiving money 10
12490 Consequences for receiving an asset 12
12495 You receive both money and an asset 12
Subdivision124C—Statutory licences 15
124140 New statutory licences 15
124145 Rollover consequences—capital gain or loss disregarded 16
124150 Rollover consequences—partial rollover 16
124155 Rollover consequences—all original licences were postCGT 17
124160 Rollover consequences—all original licences were preCGT 18
124165 Rollover consequences—some original licences were preCGT, others were postCGT 18
Subdivision124D—Strata title conversion 19
124190 Strata title conversion 19
Subdivision124E—Exchange of shares or units 19
124240 Exchange of shares in the same company 20
124245 Exchange of units in the same unit trust 20
Subdivision124F—Exchange of rights or options 21
124295 Exchange of rights or option to acquire shares in a company 21
124300 Exchange of rights or option to acquire units in a unit trust 22
Subdivision124G—Exchange of shares in one company for shares in another company 23
Guide to Subdivision124G 23
124350 What this Subdivision is about 23
124355 Summary of rules 24
Disposal case 25
124360 Disposal of shares in one company for shares in another one 25
124365 Other requirements to be satisfied 25
Redemption or cancellation case 27
124370 Redemption or cancellation of shares in one company for shares in another one 27
124375 Other requirements to be satisfied 28
Rules applying to both cases 29
124380 Requirements to be satisfied in both cases 29
124382 Special rules for ADI restructures 30
Consequences for the interposed company unless consolidated group continues 31
124385 Consequences for the interposed company 31
Additional consequences for member if shares are trading stock or revenue assets 32
124390 Deferral of profit or loss on shares 32
Subdivision124H—Exchange of units in a unit trust for shares in a company 34
Guide to Subdivision124H 34
124435 What this Subdivision is about 34
124440 Summary of rules 35
Disposal case 35
124445 Disposal of units in a unit trust for shares in a company 35
124450 Other requirements to be satisfied 35
Redemption or cancellation case 37
124455 Redemption or cancellation of units in a unit trust for shares in a company 37
124460 Other requirements to be satisfied 37
Rules applying to both cases 38
124465 Requirements to be satisfied in both cases 38
Consequences for the company 39
124470 Consequences for the company 39
Subdivision124I—Conversion of a body to an incorporated company 40
124520 Conversion of a body to an incorporated company 40
Subdivision124J—Crown leases 41
Guide to Subdivision124J 41
124570 What this Subdivision is about 41
Operative provisions 42
124575 Extension or renewal of Crown lease 42
124580 Meaning of Crown lease 43
124585 Original right differs in area from new right 43
124590 Part of original right excised 43
124595 Treating parts of new right as separate assets 44
124600 What is the rollover? 44
124605 Change of lessor 45
Subdivision124K—Depreciating assets 46
124655 Rollover for depreciating assets 46
124660 Right granted to associate 46
Subdivision124L—Prospecting and mining entitlements 47
Guide to Subdivision124L 47
124700 What this Subdivision is about 47
Operative provisions 47
124705 Extension or renewal of prospecting or mining entitlement 47
124710 Meaning of prospecting entitlement and mining entitlement 48
124715 Original entitlement differs in area from new entitlement 49
124720 Part of original entitlement excised 49
124725 Treating parts of new entitlement as separate assets 50
124730 What is the rollover? 50
Subdivision124M—Scrip for scrip rollover 51
Guide to Subdivision124M 51
124775 What this Subdivision is about 51
Operative provisions 52
124780 Replacement of shares 52
124781 Replacement of trust interests 55
124782 Transfer or allocation of cost base of shares acquired by acquiring entity etc. 57
124783 Meaning of significant stakeholder, common stakeholder, significant stake and common stake 59
124784 Cost base of equity or debt given by acquiring entity to ultimate holding company 61
124785 What is the rollover? 62
124790 Partial rollover 63
124795 Exceptions 63
124800 Interest received for preCGT interest 64
124810 Certain companies and trusts not regarded as having 300 members or beneficiaries 64
Subdivision124N—Disposal of assets by a trust to a company 66
Guide to Subdivision124N 66
124850 What this Subdivision is about 66
Operative provisions 67
124855 What this Subdivision deals with 67
124860 Requirements for rollover 67
124865 Entities both choose the rollover 69
124870 Rollover for owner of units or interests in a trust 69
124875 Effect on the transferor and transferee 70
Subdivision124O—FSR (financial services reform) transitions 71
Same owner rollovers 72
124880 Old licence rollover (same owner) 72
124885 Qualified licence rollover (same owner) 72
124890 Rights rollover (same owner) 73
124895 Consequences of a same owner rollover 73
New owner rollovers 75
124900 Old licence rollover (new owner) 75
124905 Qualified licence rollover (new owner) 77
124910 Rights rollover (new owner) 78
124915 Consequences of a new owner rollover (where one CGT asset comes to an end) 79
124920 Consequences of a new owner rollover (where more than one CGT asset comes to an end) 80
Extension of FSR transition period 82
124925 Special extension of the 10March 2004 cutoff date (same owner rollovers) 82
124930 Special extension of the 10March 2004 cutoff date (new owner rollovers) 83
Subdivision124P—Exchange of a membership interest in an MDO for a membership interest in another MDO 83
Guide to Subdivision124P 83
124975 What this Subdivision is about 83
Operative provisions 84
124980 Exchange of membership interests in an MDO 84
124985 What the rollover is for postCGT interests 85
124990 Partial rollover 85
124995 PreCGT interests 86
Subdivision124Q—Exchange of stapled ownership interests for ownership interests in a unit trust 86
Guide to Subdivision124Q 86
1241040What this Subdivision is about 86
Operative provisions 86
1241045Exchange of stapled securities 86
1241050Conditions 88
1241055Consequences of the rollover for exchanging members 89
1241060Consequences of the rollover for interposed trust 90
1241065Certain foreign holders disregarded 91
Division125—Demerger relief 93
Guide to Division125 93
1251 What this Division is about 93
Subdivision125A—Object of this Division 94
1255 Object of this Division 94
Subdivision125B—Consequences for owners of interests 94
Guide to Subdivision125B 94
12550 Guide to Subdivision125B 94
Operative provisions 95
12555 When a rollover is available for a demerger 95
12560 Meaning of ownership interest and related terms 95
12565 Meanings of demerger group, head entity and demerger subsidiary 97
12570 Meanings of demerger, demerged entity and demerging entity 98
12575 Exceptions to subsection 12570(2) 102
12580 What is the rollover? 104
12585 Cost base adjustments where CGT event happens but no rollover chosen 106
12590 Cost base adjustments where no CGT event 107
12595 No other cost base adjustment after demerger 107
125100 No further demerger relief in some cases 107
Subdivision125C—Consequences for members of demerger group 108
Guide to Subdivision125C 108
125150 Guide to Subdivision125C 108
Operative provisions 108
125155 Certain capital gains or losses disregarded for demerging entity 108
125160 No CGT event J1 108
125165 Adjusted capital loss for value shift under a demerger 109
125170 Reduced cost base reduction if demerger asset subject to rollover 109
Subdivision125D—Corporate unit trusts and public trading trusts 110
Guide to Subdivision125D 110
125225 Guide to Subdivision125D 110
Operative provisions 110
125230 Application of Division to corporate unit trusts and public trading trusts 110
Division126—Sameasset rollovers 111
Guide to Division126 111
1261 What this Division is about 111
Subdivision126A—Marriage breakdown 111
1265 CGT event involving spouses 112
12615 CGT event involving company or trustee 114
12620 Subsequent CGT event happening to rollover asset where transferor was a CFC or a nonresident trust 116
12625 Conditions for the purposes of subsections 1265(3A) and 12615(5) 117
Subdivision126B—Companies in the same whollyowned group 118
Guide to Subdivision126B 118
12640 What this Subdivision is about 118
Operative provisions 118
12645 Rollover for members of whollyowned group 118
12650 Requirements for rollover 119
12655 When there is a rollover 121
12660 Consequences of rollover 122
12675 Originating company is a CFC 123
12685 Effect of rollover on certain liquidations 124
Subdivision126C—Changes to trust deeds 126
Guide to Subdivision126C 126
126125 What this Subdivision is about 126
126130 Changes to trust deeds 126
126135 Consequences of rollover 127
Subdivision126D—Small superannuation funds 127
126140 CGT event involving small superannuation funds 127
Subdivision126E—Entitlement to shares after demutualisation and scrip for scrip rollover 131
Guide to Subdivision126E 131
126185 What this Subdivision is about 131
Operative provisions 131
126190 When there is a rollover 131
126195 Consequences of rollover 132
Subdivision126F—Transfer of assets of superannuation funds to meet licensing requirements 132
Guide to Subdivision126F 132
126200 What this Subdivision is about 132
Operative provisions 133
126205 Object of this Subdivision 133
126210 When there is a rollover and what its effects are 133
Division128—Effect of death 136
Guide to Division128 136
1281 What this Division is about 136
General rules 136
12810 Capital gain or loss when you die is disregarded 136
12815 Effect on the legal personal representative or beneficiary 137
12820 When does an asset pass to a beneficiary? 139
12825 The beneficiary is a trustee of a superannuation fund etc. 140
Special rules for joint tenants 140
12850 Joint tenants 140
Division130—Investments 142
Guide to Division130 142
1301 What this Division is about 142
Subdivision130A—Bonus shares and units 143
Guide to Subdivision130A 143
13015 Acquisition time and cost base of bonus equities 143
Operative provisions 144
13020 Issue of bonus shares or units 144
Subdivision130B—Rights 147
13040 Exercise of rights 147
13045 Timing rules 151
13050 Application to options 151
Subdivision130C—Convertible interests 151
13060 Shares or units acquired by converting a convertible interest 151
Subdivision130D—Employee share schemes 154
13080 Share or right acquired under employee share scheme 154
13083 Qualifying shares and qualifying rights 155
13085 Share or right acquired under employee share scheme involving your associate 157
13090 Share or right acquired under an employee share trust—beneficiary absolutely entitled 158
13095 Share or right acquired under an employee share trust—100% takeover or restructure 160
13097 Stapled securities 160
Subdivision130E—Exchangeable interests 161
130100 Exchangeable interest 162
130105 Shares acquired in exchange for the disposal or redemption of an exchangeable interest 162
Division132—Leases 165
1321 Lessee incurs expenditure to get lease term varied or waived 165
1325 Lessor pays lessee for improvements 165
13210 Grant of a longterm lease 165
13215 Lessee of land acquires reversionary interest of lessor 166
Division134—Options 168
1341 Exercise of options 168
Division149—When an asset stops being a preCGT asset 171
Subdivision149A—Key concepts 171
14910 What is a preCGT asset? 171
14915 Majority underlying interests in a CGT asset 172
Subdivision149B—When asset of nonpublic entity stops being a preCGT asset 173
14925 Which entities are affected 173
14930 Effects if asset no longer has same majority underlying ownership 173
14935 Cost base elements of asset that stops being a preCGT asset 174
Subdivision149C—When asset of public entity stops being a preCGT asset 174
14950 Which entities are affected 175
14955 Entity to give the Commissioner evidence periodically as to whether asset still has same majority underlying ownership 176
14960 What the evidence must show 177
14970 Effects if asset no longer has same majority underlying ownership 179
14975 Cost base elements of asset that stops being a preCGT asset 179
14980 No more evidence needed after asset stops being a preCGT asset 179
Subdivision149F—How to treat a “demutualised” public entity 180
149162 Subdivision applies only if entity gives sufficient evidence 180
149165 Members treated as having underlying interests in assets until demutualisation 180
149170 Effect of demutualisation of interposed company 181
Division152—Small business relief 182
Guide to Division152 182
1521 What this Division is about 182
Subdivision152A—Basic conditions for relief under this Division 183
Guide to Subdivision152A 183
1525 What this Subdivision is about 183
Basic conditions for relief 185
15210 Basic conditions for relief 185
15212 Special conditions for CGT event D1 186
Maximum net asset value test 186
15215 Maximum net asset value test 186
15220 Meaning of net value of the CGT assets 187
Active asset test 189
15235 Active asset test 189
15240 Meaning of active asset 189
15242 Trustee of discretionary trust may nominate beneficiaries to be controllers of trust 192
15245 Continuing time periods for involuntary disposals 193
Significant individual test 195
15250 Significant individual test 195
15255 Meaning of significant individual 195
CGT concession stakeholder 195
15260 Meaning of CGT concession stakeholder 195
Small business participation percentage 196
15265 Small business participation percentage 196
15270 Direct small business participation percentage 196
15275 Indirect small business participation percentage 197