Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 112 - Modifications to cost base and reduced cost base  

Subdivision 112-A - General modifications  

SECTION 112-36   Acquisitions of assets involving look-through earnout rights  

Consequences for cost base and reduced cost base

112-36(1)    
If you *acquire a *CGT asset because an entity *disposes of the CGT asset to you, and that disposal causes *CGT event A1 (the first CGT event ) to happen:

(a) neither the *cost base nor the *reduced cost base of the CGT asset includes the value of any *look-through earnout right relating to the CGT asset and the acquisition; and

(b) include in the first element of the CGT asset ' s cost base and reduced cost base any *financial benefit that you provide under such a look-through earnout right; and

(c) reduce the first element of the CGT asset ' s cost base and reduced cost base by an amount equal to the amount of any financial benefit that you receive under such a look-through earnout right.

Remaking choices affected by the look-through earnout right

112-36(2)    
Despite section 103-25 , you may remake any choice you made under this Part or Part 3-3 for a later *CGT event involving the *CGT asset if:

(a) after the later CGT event, you provide or receive a *financial benefit under such a *look-through earnout right; and

(b) you remake the choice at or before the time you are required to lodge your *income tax return for the income year in which the financial benefit is provided or received.

Amending assessments affected by the look-through earnout right

112-36(3)    
The Commissioner may amend an assessment of a *tax-related liability if:

(a) an entity provides or receives a *financial benefit under such a *look-through earnout right; and

(b) the amount of the tax-related liability:

(i) depends on that entity ' s taxable income for an income year in which a *CGT event, involving the *CGT asset, happens after the first CGT event but before the financial benefit is provided or received; or

(ii) is otherwise affected by that right ' s character as a look-through earnout right; and

(c) the Commissioner makes the amendment before the end of the 4-year period starting at the end of the income year in which the last possible financial benefit becomes or could become due under the look-through earnout right.

The tax-related liability need not be a liability of that entity.

Note:

Subparagraph (b)(ii) covers changes to the amount of that tax-related liability that happen directly or indirectly because of subsection (1) or (2).

112-36(4)    
If at a particular time a right is taken never to have been a *look-through earnout right because of subsection 118-565(2) , the Commissioner may amend an assessment of a *tax-related liability for up to 4 years after that time if:

(a) an entity provides or receives a *financial benefit under the right; and

(b) the amount of the tax-related liability:

(i) depends on that entity ' s taxable income for an income year in which a *CGT event, involving the *CGT asset, happens after the first CGT event but before the financial benefit is provided or received; or

(ii) was otherwise affected by that right ' s character as a look-through earnout right before subsection 118-565(2) applied.

The tax-related liability need not be a liability of that entity.

Note:

Subsection 118-565(2) restricts look-through earnout rights to rights to financial benefits over a period not exceeding 5 years from the end of the income year in which the first CGT event happens.

112-36(5)    
If, after providing or receiving a *financial benefit under a right referred to in subsection (3) or (4):

(a) you are dissatisfied with an assessment referred to in that subsection; and

(b) the Commissioner notifies you that the Commissioner has decided under that subsection not to amend your assessment;

you may object against the assessment, to the extent that it does not take account of that right ' s character (as a *look-through earnout right or not such a right), in the manner set out in Part IVC of the Taxation Administration Act 1953 .