New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 (133 of 2003)
Schedule 1 Removal of taxing point on conversion or exchange of traditional securities
Income Tax Assessment Act 1997
15 After section 130-90
Insert:
Subdivision 130-E - Exchangeable interests
Table of sections
130-100 Exchangeable interest
130-105 Shares acquired in exchange for the disposal or redemption of an exchangeable interest
130-100 Exchangeable interest
An exchangeable interest is a *traditional security that:
(a) was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to a *connected entity of the issuer of the traditional security; or
(ii) redeemed;
in exchange for *shares in a company that is neither:
(iii) the issuer of the traditional security; nor
(iv) a connected entity of the issuer of the traditional security; and
(b) was issued on or after 1 July 2001.
130-105 Shares acquired in exchange for the disposal or redemption of an exchangeable interest
Cost base and reduced cost base
(1) The table has effect:
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Exchange of an exchangeable interest |
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Item |
In this situation: |
The rules about cost base and reduced cost base are modified in this way... |
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1 |
You *acquire shares in a company in exchange for the disposal of an *exchangeable interest, and the disposal of the exchangeable interest was to: (a) the issuer of the exchangeable interest; or (b) a *connected entity of the issuer of the exchangeable interest. |
The first element of the *cost base of the shares is the sum of: (a) the cost base of the exchangeable interest at the time of the disposal; and (b) any amount paid for the exchange, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (2). The first element of their *reduced cost base is worked out similarly. |
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2 |
You *acquire shares in a company in exchange for the redemption of an *exchangeable interest. |
The first element of the *cost base of the shares is the sum of: (a) the cost base of the exchangeable interest at the time of the redemption; and (b) any amount paid for the exchange, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (2). The first element of their *reduced cost base is worked out similarly. |
(2) An amount is to be added under this subsection if a *capital gain on the disposal or redemption of the exchangeable interest has been reduced under section 118-20. This is so even though a capital gain that is made on the disposal or redemption of the exchangeable interest is disregarded under subsection (4). The amount to be added is the amount of the reduction.
(3) The payment for the exchange can include giving property (see section 103-5).
Other CGT consequences
(4) The table has effect:
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Exchange of an exchangeable interest |
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Item |
In this situation: |
This is the result: |
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1 |
You *acquire shares in a company in exchange for the disposal of an *exchangeable interest, and the disposal of the exchangeable interest was to: (a) the issuer of the exchangeable interest; or (b) a *connected entity of the issuer of the exchangeable interest. |
(a) you are taken to have acquired the shares when the disposal of the exchangeable interest happened; and (b) a *capital gain or *capital loss you make from the disposal of the exchangeable interest is disregarded. |
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2 |
You *acquire shares in a company in exchange for the redemption of an *exchangeable interest. |
(a) you are taken to have acquired the shares when the redemption of the exchangeable interest happened; and (b) a *capital gain or *capital loss you make from the redemption of the exchangeable interest is disregarded. |
Application
(5) This section applies to the disposal or redemption of an *exchangeable interest on or after 1 July 2001.