Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 725 - Direct value shifting affecting interests in companies and trusts  

Subdivision 725-C - Consequences of a direct value shift  

General

SECTION 725-205   Consequences depend on character of down interests and up interests  

725-205(1)    
The consequences for you of the ^* direct value shift depend on the character of the ^* down interests and ^* up interests of which you are an ^* affected owner.

725-205(2)    
There are consequences for all your ^* down interests and ^* up interests in their character as ^* CGT assets. However, some of them may also be ^* trading stock or ^* revenue assets. There are additional consequences for those interests in their character as trading stock or revenue assets.

Note:

For example, you may own a down interest that is a CGT asset and a revenue asset.

Sections 725-240 to 725-255 set out the consequences for you of a shift in value from that interest in its character as a CGT asset. The cost base of the asset will be decreased, which will affect the calculation of a capital gain when a CGT event happens to the interest.

Section 725-320 sets out the consequences for you of a shift in value from that interest in its character as a revenue asset. The adjustment made under that section will affect the calculation of any profit on the sale of the interest.

Any overlap between the capital gain and the profit realised on the sale of the interest is then dealt with under section 118-20 .

In some instances, the direct value shift may result in a taxing event generating a gain for you in the income year in which the shift happens. That gain will be both a capital gain (because the down interest can be characterised as a CGT asset) and an increase in your assessable income (because the down interest can be characterised as a revenue asset). Again, any overlap is dealt with under section 118-20 .