INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 2 - Application  

SECTION 160M   WHAT CONSTITUTES A DISPOSAL OR ACQUISITION  

160M(1)   [Change in ownership]  

Subject to this Part, where a change has occurred in the ownership of an asset, the change shall be deemed, for the purposes of this Part, to have effected a disposal of the asset by the person who owned it immediately before the change and an acquisition of the asset by the person who owned it immediately after the change.

160M(1A)   [Change in beneficial ownership]  

It is declared for the avoidance of doubt that, subject to paragraphs (3)(a) and (aa), a change in the legal ownership of an asset does not constitute a change in the ownership of the asset for the purposes of this Part unless there is also a change in the beneficial ownership of the asset.

160M(2)   [Various means of change in ownership]  

A reference in subsection (1) to a change in the ownership of an asset is a reference to a change that has occurred in any way, including any of the following ways:

(a) by the execution of an instrument;

(b) by the entering into of a transaction;

(c) by the transmission of the asset by operation of law;

(d) by the delivery of the asset;

(e) by the doing of any other act or thing;

(f) by the occurrence of any event.

160M(3)   [Declaration of trust, choses in action, etc]  

Without limiting the generality of subsection (2), a change shall be taken to have occurred in the ownership of an asset by:

(a) the creation of a trust, by declaration or settlement, over the asset, other than where either:

(i) all of the following sub-subparagraphs apply:

(A) the person who owned the asset immediately before the creation of the trust is the sole beneficiary of the trust;

(B) that person is absolutely entitled to the asset as against the trustee or would, but for a legal disability, be so entitled;

(C) the trust is not a unit trust; or

(ii) all of the following sub-subparagraphs apply:

(A) the trust is created by the transfer of an asset to a trust from another trust;

(B) the beneficiaries of the trusts are identical;

(C) the terms of the trusts, including the interest of each beneficiary in the income and corpus of the trusts, are identical;

(aa) the conversion of a trust over an asset to a unit trust where:

(i) the trust is not an existing unit trust; and

(ii) immediately before the conversion, a person was absolutely entitled to the asset as against the trustee or would, but for a legal disability, have been so entitled;

(b) in the case of an asset being a debt, a chose in action or any other right, or an interest or right in or over property - the cancellation, release, discharge, satisfaction, surrender, forfeiture, expiry or abandonment, at law or in equity, of the asset;

(c) in the case of an asset being a share in or debenture of a company - the redemption in whole or in part, or the cancellation, of the share or debenture; or

(d) subject to subsection (4), a transaction in relation to the asset under which the use and enjoyment of the asset was or is obtained by a person for a period at the end of which the title to the asset will or may pass to that person.

160M(3A)   [Transfer of asset to trust]  

For the purposes of paragraph (3)(a), the transfer of an asset to a trust is taken to be the creation, by settlement, of a trust over the asset.

160M(4)   [Use and enjoyment but no title passes]  

A change shall not be taken to have occurred in the ownership of an asset by a transaction referred to in paragraph (3)(d) if the period for which the person referred to in that paragraph has the use and enjoyment of the asset terminates without the title to the asset passing to that person and nothing in section 170 prevents the amendment of an assessment for the purpose of giving effect to this subsection.

160M(4A)   [No beneficiary absolutely entitled to the asset]  

Subsection (4B) applies if:

(a) a change in the ownership of an asset results from the application of paragraph (3)(a); and

(b) the person who owned the asset immediately before the creation of the trust is the trustee of the trust; and

(c) immediately after the change, no beneficiary is absolutely entitled to the asset as against the trustee.

160M(4B)   [Cost base where no beneficiary absolutely entitled]  

If this subsection applies, then, for the purposes of the application of this Part to any later disposal of the asset by the trustee, the cost base, indexed cost base or reduced cost base of the asset is the amount that would apply if the trustee had acquired the asset, at the time of the change in ownership resulting from the application of paragraph (3)(a), for a consideration equal to its market value at that time.

160M(5)   [Issue or allotment of shares, units; construction or creation of assets]  

For the purposes of this Part:

(a) an issue or allotment of shares in a company constitutes an acquisition of the shares by the person to whom they were issued or allotted but does not constitute a disposal of the shares by the company;

(aa) an issue of units in a unit trust by the trustee of the unit trust constitutes an acquisition of the units by the person to whom they were issued but does not constitute a disposal of the units by the trustee of the unit trust;

(b) if:

(i) a person constructs or creates an asset; and

(ii) on its construction or creation, the asset is not vested in another person;

the person constructing or creating the asset is taken to have acquired, and to have commenced to own, the asset at the time applicable under subsection 160U(5) ; and

(c) if:

(i) a person constructs or creates an asset that is a form of corporeal property; and

(ii) on its construction or creation, the asset is vested in another person;

the other person is taken to have acquired, and to have commenced to own, the asset at the time applicable under subparagraph 160U(6)(a)(i) or (b)(i).

160M(6)   [Conditions for subsec (6A) and (6B) to apply]  

Subject to this Part (other than subsection (7) of this section), if:

(a) a person creates an asset that is not a form of corporeal property; and

(b) on its creation, the asset is vested in another person;

then subsections (6A) and (6B) apply.

160M(6A)   [Person creating asset]  

If subsection (6) applies:

(a) the person creating the asset is taken to have acquired, and to have commenced to own, the asset at the time applicable under subparagraph 160U(6)(a)(ii) or (b)(ii); and

(b) the person creating the asset is later taken to have disposed of the asset to the other person mentioned in paragraph (6)(b) of this section at the time applicable under subparagraph 160U(6)(a)(iii) or (b)(iii); and

(c) the person so taken to dispose of the asset is taken not to have paid or given any consideration, or incurred any costs or expenditure, referred to in any of paragraphs 160ZH(1)(a) to (d) (inclusive), (2)(a) to (d) (inclusive) and (3)(a) to (d) (inclusive) in respect of the asset; and

(d) paragraph 160ZD(2)(a) does not apply to that disposal of the asset.

160M(6B)   [Person acquiring asset]  

Also, if subsection (6) applies:

(a) the other person mentioned in paragraph (6)(b) is taken to have acquired the asset from the person creating it, and to have commenced to own it, at the time applicable under subparagraph 160U(6)(a)(i) or (b)(i); and

(b) paragraph 160ZH(9)(a) does not apply to that acquisition of the asset.

160M(6BA)   [Asset created not a form of corporeal property]  

Subject to this Part (other than subsection (7) of this section), subsection (6BB) applies if:

(a) a person creates an asset that is not a form of corporeal property; and

(b) on its creation, the asset is held by the person in the person's capacity as trustee of a trust estate; and

(c) at the time of that creation, no beneficial interest in the asset is held by a person in the person's capacity as a beneficiary of the trust estate; and

(d) the person has received consideration in respect of the creation of the asset.

160M(6BB)   [Deemed disposal and reacquisition of non-corporeal asset]  

If this subsection applies:

(a) the person creating the asset is taken to have acquired, and to have commenced to own, the asset at the time applicable under subparagraph 160U(6)(a)(ii) or (b)(iv); and

(b) that person is taken not to have paid or given any consideration, or incurred any costs or expenditure, referred to in paragraphs 160ZH(1)(a) to (d) (inclusive), (2)(a) to (d) (inclusive) and (3)(a) to (d) (inclusive) in respect of the creation of the asset; and

(c) that person is taken to have disposed of the asset at the time applicable under subparagraph 160U(6)(a)(iii) or (b)(iv) and to have immediately re-acquired it; and

(d) the person is taken to have received in respect of the disposal of the asset, and to have paid in respect of the re-acquisition, the market value of the asset at the time of the disposal.

160M(6C)   [Application of subsec 6]  

Subsections (6) and (6BA) apply to the creation of an asset:

(a) whether or not the asset is created out of, over or otherwise in connection with, an existing asset; and

(b) whether or not the person creating the asset owned or disposed of anything at the moment of creation of the asset.

160M(6D)   [``vest'']  

In subsections (5) and (6):

"vest"
, in relation to an asset, means:

(a) in the case of an asset that is not a right - confer ownership of the asset on a person; or

(b) in the case of an asset that is a right - create the right in a person (whether or not conferring ownership of the asset on the person).

160M(7)   [Entitlement to receive money or other consideration]  

Without limiting the generality of subsection (2) but subject to the other provisions of this Part, where -

(a) either:

(i) an act or transaction has taken place in relation to an asset, whether or not affecting the asset; or

(ii) an event affecting an asset has occurred;

where, in a subparagraph (i) case in which the asset was affected or in any subparagraph (ii) case, it does not matter whether the asset was affected adversely or beneficially, or neither adversely nor beneficially; and

(b) the person who owned the asset at the time of the act, transaction or event has received, or is entitled to receive, an amount of money or other consideration by reason of the act, transaction or event (whether or not any asset was or will be acquired by the person paying the money or giving the other consideration) including, but not limited to, an amount of money or other consideration -

(i) in the case of an asset being a right - in return for refraining from exercising the right; or

(ii) for use or exploitation of the asset,

the act, transaction or event constitutes a disposal by the person who received, or is entitled to receive, the money or other consideration of an asset created by the disposal and, for the purposes of the application of this Part in relation to that disposal -

(c) the money or other consideration constitutes the consideration in respect of the disposal; and

(d) the person shall be deemed not to have paid or given any consideration, or incurred any costs or expenditure, referred to in paragraph 160ZH(1)(a) , (b), (c) or (d), (2)(a), (b), (c) or (d) or (3)(a), (b), (c) or (d) in respect of the asset; and

(e) the person is taken to have acquired and owned the asset immediately before the disposal.

160M(7A)   [Transactions in period 20 September 1985 to 22 May 1986]  

Subsection (7), as in force before it was amended by the Taxation Laws Amendment Act (No. 4) 1992 , is taken not to have applied in relation to:

(a) an act or transaction that took place in relation to an asset during the period that commenced on 20 September 1985 and ended on 22 May 1986; or

(b) an event affecting an asset that occurred during that period;

if the requirement set out in subsection (7B) is met.

160M(7B)   [Requirements for former subsec (7) not to apply]  

For the purposes of subsection (7A), the requirement is:

(a) if the person who received, or was entitled to receive, the amount of money or other consideration referred to in paragraph (7)(b) owned the asset when the act or transaction took place, or the event occurred - that the person acquired the asset before 20 September 1985; or

(b) in any other case - that the person who owned the asset when the act or transaction took place, or the event occurred, acquired the asset before 23 May 1986.

160M(8)   [Person ceasing to be resident]  

Where a taxpayer, being a resident, has, on or after 20 September 1985, ceased to be a resident, the taxpayer shall be deemed for the purposes of this Part -

(a) to have, at the time when the taxpayer ceased to be a resident (in this subsection referred to as the ``relevant time'' ), disposed of every asset that was owned by the taxpayer immediately before the relevant time, other than -

(i) a taxable Australian asset;

(ii) any other asset that was acquired by the taxpayer before 20 September 1985; or

(iii) an asset to which subsection (9), (10) or (11) applies; and

(b) to have so disposed of every such asset for a consideration equal to the market value of the asset at the relevant time.

160M(9)   [Trust estate ceasing to be resident trust estate]  

Where a resident trust estate has, on or after 20 September 1985, ceased to be a resident trust estate, the trustee of the trust estate shall be deemed for the purposes of this Part -

(a) to have, at the time when the resident trust estate ceased to be a resident trust estate (in this subsection referred to as the ``relevant time'' ), disposed of every asset that was, immediately before the relevant time, owned by the trustee as a trustee of that trust estate, other than -

(i) a taxable Australian asset; or

(ii) any other asset that was acquired by the trustee before 20 September 1985; and

(b) to have so disposed of every such asset for a consideration equal to the market value of the asset at the relevant time.

160M(10)   [Unit trust ceasing to be resident unit trust]  

Where a resident unit trust has, on or after 20 September 1985, ceased to be a resident unit trust, the trustee of the unit trust shall be deemed for the purposes of this Part -

(a) to have, at the time when the resident unit trust ceased to be a resident unit trust (in this subsection referred to as the ``relevant time'' ), disposed of every asset that was, immediately before the relevant time, owned by the trustee as a trustee of that unit trust, other than -

(i) a taxable Australian asset; or

(ii) any other asset that was acquired by the trustee before 20 September 1985; and

(b) to have so disposed of every such asset for a consideration equal to the market value of the asset at the relevant time.

160M(11)    

160M(11A)   [Limits on deemed disposals]  

Subsection (8) does not deem a taxpayer to have disposed of a particular asset at a time (in this subsection called the ``relevant time'' ) when the taxpayer ceased to be a resident if:

(a) the taxpayer is a natural person;

(b) during the period of 10 years immediately before the relevant time, the taxpayer was a resident for a total period of less than 5 years; and

(c) the asset:

(i) was owned by the taxpayer immediately before the occasion (or last occasion, as the case requires) on which the taxpayer became a resident before the relevant time; or

(ii) was acquired by the taxpayer as a beneficiary of the estate of a deceased person, or as a survivor of a joint tenancy, and was so acquired after the occasion (or last occasion, as the case requires) on which the taxpayer became a resident before the relevant time.

160M(11B)   [Election re deemed disposal]  

Where:

(a) but for this subsection, a taxpayer would be deemed by subsection (8) to have disposed of a particular asset at a time (in this subsection called the ``relevant time'' ) when the taxpayer ceased to be a resident;

(b) the taxpayer is a natural person; and

(c) the taxpayer has elected that this subsection apply in relation to all assets of the taxpayer to which subsection (8) would apply at the relevant time;

the following paragraphs apply:

(d) subsection (8) does not deem the taxpayer to have disposed of the asset at the relevant time;

(e) the asset shall be taken to be a taxable Australian asset until immediately after whichever of the following first occurs:

(i) the taxpayer disposes of the asset;

(ii) the taxpayer becomes a resident.

160M(11C)   [Time of election]  

An election for the purposes of subsection (11B) shall be made on or before the date of lodgment of the return of income of the taxpayer for the year of income in which the relevant time referred to in that subsection occurred, or within such further time as the Commissioner allows.

160M(12)   [Person becoming resident]  

Where a taxpayer, being a non-resident, has, on or after 20 September 1985, become a resident, every asset that was owned by the taxpayer immediately before the time when the taxpayer became a resident (in this subsection referred to as the ``relevant time'' ), other than:

(a) a taxable Australian asset;

(b) any other asset that was acquired by the taxpayer before 20 September 1985; or

(c) an asset to which subsection (13), (14) or (15) applies;

shall be deemed for the purposes of this Part to have been acquired by the taxpayer at the relevant time and to have been so acquired for a consideration equal to the market value of the asset at the relevant time.

160M(12A)   [CFC becoming a resident]  

Where, at a particular time (in this section called the ``residence-change time'' ), a company that is a CFC ceases to be a resident of an unlisted country or a listed country and becomes a resident within the meaning of section 6 , then:

(a) subsection (12) does not apply; and

(b) subsections (12AA) and (12AB) apply.

160M(12AA)   [Application of sec 411 to 417]  

For the purposes of the application of this Part, sections 411 to 417 (inclusive) have, subject to subsection (12AB), the same effect, in relation to every commencing day non-taxable Australian asset of the company owned by the company at the residence-change time, as they would have if the taxable income, instead of the attributable income, of the company were being calculated under those sections.

160M(12AB)   [Capital gain subject to tax in listed country]  

If any capital gain on a commencing day non-taxable Australian asset in respect of the period before the residence-change time was subject to tax in a listed country, then, for the purposes of the application of this Part, sections 411 to 417 (inclusive) have the same effect in relation to the asset as they would have if:

(a) the taxable income, instead of the attributable income, of the company were being calculated under those sections; and

(b) any reference in those sections relating to the eligible CFC's commencing day or the day following the eligible CFC's commencing day were a reference relating respectively to the residence-change time or a time immediately after the residence-change time.

160M(12B)   [Interpretation]  

In subsections (12A) to (12AB):

"30 June 1990 non-taxable Australian asset"

"attributable income"
has the same meaning as in Part X;

"CFC"
has the same meaning as in Part X;

commencing day
has the same meaning as in Subdivision C of Division 7 of Part X .

commencing day non-taxable Australian asset
has the same meaning as in Subdivision C of Division 7 of Part X .

"resident of a listed country"
has the same meaning as in Part X;

"resident of an unlisted country"
has the same meaning as in Part X;

"subject to tax"
has the same meaning as in Part X.

160M(13)   [Trust estate becoming resident trust estate]  

Where a trust estate, other than a resident trust estate, has, on or after 20 September 1985, become a resident trust estate, every asset that was, immediately before the time when the trust estate became a resident trust estate (in this subsection referred to as the ``relevant time'' ), owned by the trustee as a trustee of that trust estate, other than:

(a) a taxable Australian asset; or

(b) any other asset that was acquired by the trustee before 20 September 1985;

shall be deemed for the purposes of this Part to have been acquired by the trustee as the trustee of that trust estate at the relevant time and to have been so acquired for a consideration equal to the market value of the asset at the relevant time.

160M(13A)   [Application of subsec (13) to a CFT]  

Subsection (13) does not apply where a trust estate becomes a resident trust estate if, immediately before it does so, it is a CFT, within the meaning of section 342 , because paragraph (a) of that section applies.

160M(14)   [Unit trust becoming a resident unit trust]  

Where a unit trust, other than a resident unit trust, has, on or after 20 September 1985, become a resident unit trust, every asset that was, immediately before the time when the unit trust became a resident unit trust (in this subsection referred to as the ``relevant time'' ), owned by the trustee as a trustee of that unit trust, other than:

(a) a taxable Australian asset; or

(b) any other asset that was acquired by the trustee before 20 September 1985;

shall be deemed for the purposes of this Part to have been acquired by the trustee as the trustee of that unit trust at the relevant time and to have been so acquired for a consideration equal to the market value of the asset at the relevant time.

160M(14A)   [Application of subsec (14) to a CFT]  

Subsection (14) does not apply where a unit trust becomes a resident unit trust if, immediately before it does so, it is a CFT, within the meaning of section 342 , because paragraph (a) of that section applies.

160M(15)