Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 723 - Direct value shifting by creating right over non-depreciating asset  

Subdivision 723-B - Reducing reduced cost base of interests in entity that acquires non-depreciating asset under roll-over  

SECTION 723-105   Reduced cost base of interest reduced when interest realised at a loss  

723-105(1)    
The ^* reduced cost base of a ^* primary equity interest, ^* secondary equity interest, or ^* indirect primary equity interest, in a company or trust is reduced just before a ^* realisation event that is a ^* CGT event happens to the interest if:

(a) apart from this Division, a loss would be ^* realised for income tax purposes by the CGT event; and

(b) apart from this Division, a loss would have been ^* realised for income tax purposes by a realisation event if the event had happened, just before the CGT event, to a ^* CGT asset (the underlying asset ) that the company or trust then owned and that:

(i) was not then a ^* depreciating asset; or

(ii) was then an item of ^* trading stock of the company or trust; or

(iii) was then a ^* revenue asset of the company or trust; and

(c) the loss referred to in paragraph (b) would have been reduced under Subdivision 723-A by an amount (the underlying asset loss reduction ); and

(d) for the entity (the transferor ) that owned the interest just before the CGT event, the interest was a ^* direct roll-over replacement or ^* indirect roll-over replacement for the underlying asset.

723-105(2)    
If the interest was a ^* direct roll-over replacement, its ^* reduced cost base is reduced by the amount worked out using this formula, unless that amount does not appropriately reflect the matters referred to in subsection (4):

RCB of interest             Total of RCBs of direct roll-over replacements

×   Underlying asset loss reduction

723-105(3)    
For the purposes of the formula in subsection (2):

RCB of interest
means the interest ' s ^* reduced cost base when the transferor ^* acquired it.

total of RCBs of direct roll-over replacements
means the total of the ^* reduced cost bases of all ^* direct roll-over replacements for the underlying asset when the transferor ^* acquired them.

723-105(4)    
If:

(a) the interest was an ^* indirect roll-over replacement; or

(b) the amount worked out under subsection (2) does not appropriately reflect the matters referred to in this subsection;

the interest ' s ^* reduced cost base is reduced by an amount that is appropriate having regard to these matters:

(c) the underlying asset loss reduction; and

(d) the quantum of the interest relative to all ^* direct roll-over replacements and indirect roll-over replacements that the transferor owns or has previously owned.