Tax Laws Amendment (2011 Measures No. 9) Act 2012 (12 of 2012)

Schedule 2   Capital gains tax and certain business restructures

Part 3   Roll-overs for change of incorporation

Division 1   Main amendments

Income Tax Assessment Act 1997

15   Subdivision 124-I

Repeal the Subdivision, substitute:

Subdivision 124-I - Change of incorporation

Guide to Subdivision 124-I

124-510 What this Subdivision is about

Roll-over relief is available for members of a body that is incorporated under one law and is converted to, or replaced with, a body incorporated under another law.

Table of sections

Object of this Subdivision

124-515 Object of this Subdivision

Change of incorporation without change of entity

124-520 Change of incorporation without change of entity

Old corporation wound up

124-525 Old corporation wound up

Special consequences of some roll-overs

124-530 Shares in company replacing pre-CGT and post-CGT mix of interest and rights in body

124-535 Rights as member of Indigenous corporation replacing pre-CGT and post-CGT mix of interest and rights in body

Object of this Subdivision

124-515 Object of this Subdivision

The object of this Subdivision is to ensure that CGT considerations for *members of a body incorporated under a law do not impede a change of incorporation involving converting the body to, or replacing it with, a company incorporated under:

(a) the Corporations Act 2001 or a similar *foreign law; or

(b) the Corporations (Aboriginal and Torres Strait Islander) Act 2006.

Note: Subdivision 620-A provides a roll-over for the assets of the body.

Change of incorporation without change of entity

124-520 Change of incorporation without change of entity

(1) This section applies if:

(a) you are a *member of a body incorporated under a law described in column 1 of an item of the table; and

(b) the body is converted into a company incorporated under a law described in column 2 of the item, without creating a new legal entity; and

(c) it is reasonable to conclude that there is no significant difference:

(i) between the ownership of the body, and of rights relating to the body held by entities that owned the body, just before the conversion and the ownership of the company just after the conversion; or

(ii) between the mix of ownership of the body, and of rights relating to the body held by entities that owned the body, just before the conversion and the mix of ownership of the company just after the conversion.

Note: See section 124-20 if an entity uses a share or interest sale facility.

(2) You can choose to obtain a roll-over if:

(a) as a result of the conversion you are issued with *shares in the company and you receive nothing else; and

(b) either you are an Australian resident at the time of the conversion or, if you are a foreign resident at that time:

(i) each of your interest and your other rights (if any) relating to the body was *taxable Australian property just before that time; and

(ii) the shares are taxable Australian property when they are issued.

Note 1: The roll-over consequences are set out in Subdivision 124-A and section 124-530.

Note 2: Section 103-25 tells you when you have to make the choice.

(3) If the company is incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006, subsection (2) applies in relation to rights as a *member of the company in the same way as that subsection applies to *shares in a company.

Note: This may allow you to choose to obtain a roll-over. The roll-over consequences are set out in Subdivision 124-A and section 124-535.

Exception for demutualisation of certain bodies

(4) This section does not apply to demutualisation of a body if Division 326 in Schedule 2H to the Income Tax Assessment Act 1936 applies to the demutualisation.

Note: That Division deals with demutualisation of entities other than insurance companies and health insurers.

Old corporation wound up

124-525 Old corporation wound up

(1) This section applies if:

(a) a body is incorporated under a law described in column 1 of an item of the table; and

(b) a company is incorporated under a law described in column 2 of the item; and

(c) the body ceases to exist, but the company continues to exist, after the time (the switch time ) the *members of the body receive *shares in the company, or rights as members of it if it is incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006, on account of:

(i) their interests in the body; and

(ii) their other rights (if any) relating to the body; and

(d) the members of the body do not receive anything else on account of the expected ending of those interests and rights; and

(e) it is reasonable to conclude that there is no significant difference:

(i) between the ownership of the body, and of rights relating to the body held by entities that owned the body, just before the switch time and the ownership of the company just after the switch time; or

(ii) between the mix of ownership of the body, and of rights relating to the body held by entities that owned the body, just before the switch time and the mix of ownership of the company just after the switch time; and

Note: See section 124-20 if an entity uses a share or interest sale facility.

(f) the body *disposes of all its *CGT assets to the company, except any assets expected to be needed to meet the body’s existing or expected liabilities before it ceases to exist.

(2) You can choose to obtain a roll-over if:

(a) you were a *member of the body just before the switch time; and

(b) your ownership of your interest in the body ends at a time (the end time ) after the switch time; and

(c) at the end time you have the *shares in the company that you received at the switch time; and

(d) either you are an Australian resident at the end time or, if you are a foreign resident at the end time:

(i) each of your interest in the body and your other rights (if any) relating to the body was *taxable Australian property just before the end time; and

(ii) the shares in the company that you received at the switch time are taxable Australian property at the end time.

Note 1: The roll-over consequences are set out in Subdivision 124-A and section 124-530.

Note 2: Section 103-25 tells you when you have to make the choice.

(3) If the company is incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006, subsection (2) applies in relation to rights as a *member of the company in the same way as that subsection applies to *shares in a company.

Note: This may allow you to choose to obtain a roll-over. The roll-over consequences are set out in Subdivision 124-A and section 124-535.

Special consequences of some roll-overs

124-530 Shares in company replacing pre-CGT and post-CGT mix of interest and rights in body

(1) This section applies if:

(a) you choose to obtain a roll-over under section 124-520 or 124-525 relating to *shares you have in the company on account of the following (your original assets ):

(i) your interest in the body mentioned in that section;

(ii) your other rights relating to the body mentioned in that section; and

(b) you *acquired some of your original assets before 20 September 1985 and the rest of them on or after that day.

(2) You are taken to have *acquired so many of the *shares before 20 September 1985 as is reasonable, having regard to:

(a) the number and *market value of your original assets; and

(b) the number and market value of the shares.

(3) The first element of the *cost base of each of the *shares not taken by subsection (2) to have been *acquired before 20 September 1985 (your post-CGT shares ) is such amount as is reasonable having regard to:

(a) the total of the cost bases of your original assets that you acquired on or after 20 September 1985; and

(b) the number and *market value of your post-CGT shares.

(4) The reduced cost base of each of your post-CGT shares is worked out similarly.

(5) This section has effect despite subsections 124-15(5) and (6).

124-535 Rights as member of Indigenous corporation replacing pre-CGT and post-CGT mix of interest and rights in body

(1) This section applies if:

(a) you choose to obtain a roll-over under section 124-520 or 124-525 relating to rights (the replacement rights ) you have as a *member of a company incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 on account of the following (your original assets ):

(i) your interest in the body mentioned in that section;

(ii) your other rights relating to the body mentioned in that section; and

(b) you *acquired any of your original assets before 20 September 1985.

(2) You are taken to have *acquired the replacement rights before 20 September 1985.

(3) This section has effect despite subsection 124-15(5).