Tax Laws Amendment (2013 Measures No. 1) Act 2013 (119 of 2013)

Schedule 1   Strengthening scrip for scrip roll-over, small business entity and other concessions

Part 3   Entity making the gain or loss

Income Tax Assessment Act 1997

17   Subdivisions 106-C and 106-D

Repeal the Subdivisions, substitute:

Subdivision 106-C - Absolutely entitled beneficiaries

Table of sections

106-50 Absolutely entitled beneficiaries

106-50 Absolutely entitled beneficiaries

(1) For the purposes of this Part and Part 3-3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity), from just after the time you become absolutely entitled to a *CGT asset as against the trustee of a trust (disregarding any legal disability), the asset is treated as being your asset (instead of being an asset of the trust).

(2) This Part, Part 3-3 and Subdivision 328-C apply, from just after the time you become absolutely entitled to a *CGT asset as against the trustee of a trust (disregarding any legal disability), to an act done in relation to the asset by the trustee as if the act had been done by you (instead of by the trustee).

Example: An individual becomes absolutely entitled to a CGT asset of a trust. The trustee later sells the asset. Any capital gain or loss from the sale is made by the individual, not the trustee.

Subdivision 106-D - Securities, charges and encumbrances

Table of sections

106-60 Effect of assets being held by security holders

106-60 Securities, charges and encumbrances

(1) For the purposes of this Part and Part 3-3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity):

(a) the vesting of a *CGT asset in an entity is ignored, if:

(i) the vesting is for the purpose of enforcing, giving effect to or maintaining a security, charge or encumbrance over the asset; and

(ii) the security, charge or encumbrance remains over the asset just after the vesting; and

(b) a CGT asset is treated as vesting in an entity at the time a security, charge or encumbrance ceases to be over the asset, if:

(i) the entity holds the asset just after that time because the asset vested in the entity at an earlier time; and

(ii) that earlier vesting was ignored under paragraph (a) because it was for the purpose of enforcing, giving effect to or maintaining the security, charge or encumbrance.

(2) This Part, Part 3-3 and Subdivision 328-C apply to an act done by an entity (or an *agent of the entity) in relation to a *CGT asset for the purpose of enforcing, giving effect to or maintaining a security, charge or encumbrance over the asset as if the act had been done by the entity that provided the security (instead of by the first-mentioned entity or its agent).

Example: A CGT asset of a borrower vests in a lender as security for a loan. No CGT event happens as a result of the vesting.

If the borrower fails to make payments on the loan and the lender sells the CGT asset under the security arrangement, any capital gain or loss is made by the borrower, not the lender.