Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 115 - Discount capital gains and trusts ' net capital gains  

Subdivision 115-A - Discount capital gains  

What are not discount capital gains?

SECTION 115-45   Capital gain from equity in an entity with newly acquired assets  

Purpose of this section

115-45(1)    
The purpose of this section is to deny you a *discount capital gain on your *share in a company or interest in a trust if you would not have had *discount capital gains on the majority of *CGT assets (by cost and by value) underlying the share or interest if:

(a) you had owned them for the time the company or trust did; and

(b) *CGT events had happened to them when the CGT event happened to your share or interest.

When a capital gain is not a discount capital gain

115-45(2)    
Your *capital gain from a *CGT event happening to:

(a) your *share in a company; or

(b) your *trust voting interest, unit or other fixed interest in a trust;

is not a discount capital gain if the 3 conditions in subsections (3), (4) and (5) are met. This section has effect despite section 115-5 and subsection 115-30(2) .

Note:

This section does not prevent a capital gain from being a discount capital gain if there are at least 300 members or beneficiaries of the company or trust and control of the company or trust is not and cannot be concentrated (see section 115-50 ).

You had at least 10% of the equity in the entity before the event

115-45(3)    
The first condition is that, just before the *CGT event, you and your *associates beneficially owned:

(a) at least 10% by value of the *shares in the company (except shares that carried a right only to participate in a distribution of profits or capital to a limited extent); or

(b) at least 10% of the *trust voting interests, issued units or other fixed interests (as appropriate) in the trust.

Cost bases of new assets are more than 50% of all cost bases of entity ' s assets

115-45(4)    
The second condition is that the total of the *cost bases of *CGT assets that the company or trust owned at the time of the *CGT event and had *acquired less than 12 months before then is more than half of the total of the *cost bases of the *CGT assets the company or trust owned at the time of the event.

Note:

Sections 115-30 and 115-32 , or section 115-34 , may affect the time when the company or trust is treated as having acquired a CGT asset.

Net capital gain on entity ' s new assets would be more than 50% of net capital gain on all the entity ' s assets

115-45(5)    
The third condition is that the amount worked out under subsection (6) is more than half of the amount worked out under subsection (7).

115-45(6)    
Work out the amount that would be the *net capital gain of the company or trust for the income year if:

(a) just before the *CGT event, the company or trust had *disposed of all of the *CGT assets that it owned then and had *acquired less than 12 months before the *CGT event; and

(b) it had received the *market value of those assets for the disposal; and

(c) the company or trust did not have any *capital gains or *capital losses from *CGT events other than the disposal; and

(d) the company or trust did not have a *net capital loss for an earlier income year.

Note:

Sections 115-30 and 115-32 , or section 115-34 , may affect the time when the company or trust is treated as having acquired a CGT asset.

115-45(7)    
Work out the amount that would be the *net capital gain of the company or trust for the income year if:

(a) just before the *CGT event, the company or trust had *disposed of all of the *CGT assets that it owned then; and

(b) it had received the *market value of those assets for the disposal; and

(c) all of the *capital gains and *capital losses from those assets were taken into account in working out the net capital gain, despite any rules providing that one or more of those capital gains or losses are not to be taken into account in working out the net capital gain; and

(d) the company or trust did not have any *capital gains or *capital losses from *CGT events other than the disposal; and

(e) the company or trust did not have a *net capital loss for an earlier income year.