Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 104 - CGT events  

Subdivision 104-J - CGT events relating to roll-overs  

SECTION 104-197   Failure to acquire replacement asset and to incur fourth element expenditure after a roll-over under Subdivision 152-E: CGT event J5  

104-197(1)    

CGT event J5 happens if you choose a small business roll-over under Subdivision 152-E for a *CGT event that happens in relation to a *CGT asset in an income year and, by the end of the *replacement asset period:

(a) you have not *acquired a replacement asset (the replacement asset ), and have not incurred *fourth element expenditure in relation to a CGT asset (also the replacement asset ); or

(b) the replacement asset does not satisfy the conditions set out in subsection (2).

Note:

You do not have to satisfy the basic conditions in Subdivision 152-A for the gain in relation to CGT event J5 (see subsection 152-305(4) ).

104-197(2)    
The conditions are:

(a) the replacement asset must be your *active asset; and

(b) if the replacement asset is a *share in a company or an interest in a trust:

(i) you, or an entity *connected with you, must be a *CGT concession stakeholder in the company or trust; or

(ii) CGT concession stakeholders in the company or trust must have a *small business participation percentage in you of at least 90%.

Example:

Joseph owns 50% of the shares in Company A and Company B. He is therefore a CGT concession stakeholder in the companies: see section 152-60 . The companies are connected with Joseph (see section 328-125 ) because he controls both of them.

Company A owns land which it leases to Joseph for use in a business. It sells the land at a profit and buys shares in Company B.

Subsection (2) is satisfied for the shares because Joseph is connected with Company A and is a CGT concession stakeholder in Company B.

104-197(3)    

The time of the event is at the end of the *replacement asset period.

104-197(4)    
You make a capital gain equal to the amount of the *capital gain that you disregarded under Subdivision 152-E .

104-197(5)    

The *replacement asset period may be modified or extended as mentioned in section 104-190 .