Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 727 - Indirect value shifting affecting interests in companies and trusts, and arising from non-arm ' s length dealings  

Subdivision 727-G - The realisation time method  

Operative provisions

SECTION 727-610   Consequences of indirect value shift  

727-610(1)    
This Subdivision sets out the realisation time method of working out the consequences (if any) of an ^* indirect value shift.

727-610(2)    
If those consequences are to be worked out using that method, this Subdivision applies to each ^* realisation event:

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

(b) that happens to an ^* affected interest in the ^* losing entity; and

(c) that is the first realisation event that happens to that interest at or after the ^* IVS time; and

(d) that happens:

(i) if the amount of the indirect value shift is $500,000 or more - at any time after the IVS time; or

(ii) otherwise - within 4 years after the IVS time.

727-610(3)    
If:

(a) those consequences are to be worked out using that method; and

(b) the ^* gaining entity is a company or trust (except one listed in section 727-125 (about superannuation entities)) immediately before the ^* IVS time;

this Subdivision applies to each ^* realisation event:

(c) by which a gain would, apart from this Division, be ^* realised for income tax purposes; and

(d) that happens to an ^* affected interest in the ^* gaining entity; and

(e) that is the first realisation event that happens to that interest at or after the IVS time.

727-610(4)    
The consequences for the ^* affected interest depend on its character. There are consequences for the interest in its character as a ^* CGT asset. However, if the interest is also ^* trading stock or a ^* revenue asset, there are additional consequences for it in that character.

727-610(5)    
In working out the consequences for an ^* affected interest in the ^* losing entity or ^* gaining entity, in the interest ' s character as ^* trading stock, a ^* realisation event is disregarded for the purposes of identifying under paragraph (2)(c) or (3)(e) the first realisation event that happens to that interest at or after the ^* IVS time, if:

(a) the realisation event consists of the ending of an income year; and

(b) the ^* value of the interest as trading stock on hand of an entity at the end of the income year is the interest ' s ^* cost; and

(c) the interest became part of the entity ' s trading stock on hand during that income year, or the value of the interest as trading stock of the entity on hand at the start of the income year was also the interest ' s cost.