Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-3 - CAPITAL GAINS AND LOSSES: SPECIAL TOPICS  

Division 124 - Replacement-asset roll-overs  

Subdivision 124-M - Scrip for scrip roll-over  

Operative provisions

SECTION 124-781   Replacement of trust interests  

124-781(1)    
There is a roll-over if:

(a) an entity (also the original interest holder ) exchanges:

(i) a unit or other interest (also the holder ' s original interest ) in a trust (also the original entity ) for a unit or other interest (also the holder ' s replacement interest ) in another trust (also the acquiring entity and the replacement entity ); or

(ii) an option, right or similar interest (also the holder ' s original interest ) issued by the original entity that gives the holder an entitlement to acquire a unit or other interest in the original entity for a similar interest (also the holder ' s replacement interest ) in another trust (also the acquiring entity and the replacement entity ); and

(b) entities have *fixed entitlements to all of the income and capital of the original entity and the acquiring entity; and

(c) the exchange is in consequence of an *arrangement that satisfies subsection (2) or (2A); and

(d) the conditions in subsections (3) and (4) are satisfied.

Note 1:

There are some exceptions: see section 124-795 .

Note 2:

The original interest holder can obtain only a partial roll-over if the capital proceeds for its original interest include something other than its replacement interest: see section 124-790 .

Conditions for arrangement

124-781(2)    
The *arrangement must:

(a) result in the acquiring entity owning 80% or more of the *trust voting interests in the original entity or, if there are none, 80% or more of the units or other interests in the original entity; and

(b) be one in which at least all owners of trust voting interests (or of units or other interests) in the original entity (except the acquiring entity) could participate; and

(c) be one in which participation was available on substantially the same terms for all of the owners of interests or units of a particular type in the original entity.

Conditions for arrangement - takeover bids

124-781(2A)    

The *arrangement must:

(a) satisfy paragraph (2)(a); and

(b) be, be part of, or include a takeover bid (within the meaning of the Corporations Act 2001 ) for the original interests by the acquiring entity that is not carried out in contravention of the provisions mentioned in paragraphs 612(a) to (g) of that Act.

Note:

For exemption and modification of provisions by ASIC (and review by the takeovers panel) see Part 6.10 of the Corporations Act 2001 . For Court declarations excusing contraventions see section 1325D of that Act.

Conditions for roll-over

124-781(3)    
The conditions are:

(a) the original interest holder *acquired its original interest on or after 20 September 1985; and

(b) apart from the roll-over, it would make a *capital gain from a *CGT event happening in relation to its original interest; and

(c) it chooses to obtain the roll-over or, if section 124-782 applies to it for the *arrangement, it and the trustee of the acquiring entity jointly choose to obtain the roll-over; and

(d) if that section applies to it, it informs that trustee in writing of the *cost base of its original interest as at the time just before a CGT event happened in relation to it.

Note:

If the original interest holder also exchanges a CGT asset that it acquired before 20 September 1985, the cost base of any interest received in exchange for it is worked out under section 124-800 .

Further roll-over conditions in certain cases

124-781(4)    
These conditions must be satisfied if the original interest holder and the trustee of the acquiring entity did not deal with each other at *arm ' s length and neither the original entity nor the acquiring entity had at least 300 beneficiaries just before the *arrangement started:

(a) the *market value of the original interest holder ' s *capital proceeds for the exchange is at least substantially the same as the market value of its original interest; and

(b) its replacement interest carries the same kind of rights and obligations as those attached to its original interest.

Note:

There are some cases where a trust will not be regarded as having 300 beneficiaries: see section 124-810 .

CUFS

124-781(5)    
This section applies to the holder of a Chess Unit of Foreign Security as if the holder held the underlying interests that the unit represents.

Note:

A Chess Unit of Foreign Security is an interest, traded on the stock market operated by ASX Limited, in a foreign share, unit or interest.

Meaning of trust voting interest

124-781(6)    
A trust voting interest in a trust is an interest in the trust that confers rights of the same or a similar kind as the rights conferred by a *voting share in a company.