INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 17 - Miscellaneous roll-over relief  

SECTION 160ZZPA   EXCHANGE OF UNITS IN A UNIT TRUST FOR SHARES IN A COMPANY  

160ZZPA(1)   [Application of section]  

This section applies where:

(a) under a scheme that:

(i) is for the reorganisation of the affairs of a unit trust; and

(ii) was entered into, or commenced to be carried out, after 9 December 1987;

2 or more taxpayers (in this section called the ``exchanging taxpayers'' ), being the holders of all the units (in this section called the ``exchange units'' ) in the unit trust, dispose of all the exchange units to a company (in this section called the ``interposed company'' ), not being a company in the capacity of a trustee of a trust estate;

(b) the consideration in respect of each of the disposals consists only of non-redeemable shares (in this section called the ``replacement shares'' ) in the interposed company;

(c) the total number of replacement shares is equal to, or is a multiple of, the total number of exchange units;

(d) in the case of each exchanging taxpayer - all of the exchange units held by the taxpayer are disposed of at the same time (in this section called the ``exchanging taxpayer's disposal time'' );

(e) immediately after the time (in this section called the ``completion time'' ) of the disposals or, if the disposals occurred at different times, the last of the disposals:

(i) the exchanging taxpayers are the owners of all the shares in the interposed company; and

(ii) the interposed company holds all the units in the unit trust;

(f) if the exchanging taxpayer's disposal time in relation to a particular exchanging taxpayer occurred before the completion time - the taxpayer was the owner of the replacement shares concerned at all times during the period commencing immediately after the exchanging taxpayer's disposal time and ending at the completion time;

(g) the unit trust is a resident unit trust in relation to the year of income of the unit trust in which the completion time occurred;

(h) the interposed company is a resident of Australia at the completion time and, if the disposals occurred at different times, at all times during the period commencing at the time of the first of the disposals and ending at the completion time;

(j) in the case of an exchanging taxpayer in the capacity of a trustee of a trust estate - immediately after the exchanging taxpayer's disposal time, the taxpayer holds the replacement shares concerned upon the same trust as the taxpayer held the exchange units that were disposed of to the interposed company;

(k) immediately after the completion time, each exchanging taxpayer owned the replacement shares in the interposed company in the same proportion as the taxpayer held the exchange units in the unit trust that were disposed of to the interposed company;

(m) in the case of each exchanging taxpayer - the ratio calculated in accordance with the formula:

MV of taxpayer's shares MV of total shares

where:

MV of taxpayer's shares is so much of the market value, immediately after the completion time, of the replacement shares owned by the taxpayer immediately after that time as is attributable to the exchange units held by the interposed company; and

MV of total shares is so much of the market value of all the replacement shares, immediately after the completion time, as is attributable to the exchange units held by the interposed company;

is the same as the ratio calculated in accordance with the formula:

MV of taxpayer's units MV of total units

where:

MV of taxpayer's units is the market value, immediately before the exchanging taxpayer's disposal time, of the exchange units held by the taxpayer immediately before that time; and

MV of total units is the market value of all the exchange units immediately before the exchanging taxpayer's disposal time;

(n) the interposed company has, by notice in writing given to the Commissioner within 2 months after the completion time, or within such further time as the Commissioner allows, elected that this subsection apply in respect of all the disposals; and

(p) the notice referred to in paragraph (n) is accompanied by a declaration, in a form approved by the Commissioner, with respect to the operation of this section.

160ZZPA(2)   [Conditions and effect of election]  

If:

(a) either of the following conditions is satisfied in relation to a particular exchanging taxpayer:

(i) the taxpayer is a resident of Australia;

(ii) each disposal of an exchange unit by the taxpayer constitutes a disposal of a taxable Australian asset; and

(b) the taxpayer has elected that this subsection is to apply in respect of the disposal of all the exchange units held by the taxpayer;

this Part (other than this section) does not apply in respect of the disposal of those units and:

(c) if all the exchange units held by the taxpayer were acquired by the taxpayer before 20 September 1985 - the taxpayer shall be deemed, for the purposes of this Part, to have acquired the replacement shares concerned before 20 September 1985;

(d) if:

(i) some, but not all, of the exchange units held by the taxpayer were acquired by the taxpayer before 20 September 1985;

(ii) the taxpayer, in the notice of election, nominates, as pre-CGT shares, such of the replacement shares acquired by the taxpayer as are specified in the notice; and

(iii) the number of replacement shares nominated by the taxpayer does not exceed the number calculated in accordance with the formula:

Shares

×

Pre CGT units   Total units

where:

Pre CGT units is the number of exchange units acquired by the taxpayer before 20 September 1985;

Shares is the number of replacement shares owned by the taxpayer immediately after the completion time; and

Total units is the number of exchange units that the taxpayer disposed of to the interposed company;

the taxpayer shall be deemed, for the purposes of this Part, to have acquired the nominated shares before 20 September 1985;

(e) each replacement share acquired by the taxpayer that is not deemed by paragraph (c) or (d) to have been acquired by the taxpayer before 20 September 1985 shall be taken to be a post-20 September 1985 replacement share for the purposes of paragraph (g) and subsection (3);

(f) each exchange unit that was acquired by the taxpayer on or after 20 September 1985 shall be taken to be a post-20 September 1985 exchange unit for the purposes of paragraph (g); and

(g) in the case of a post-20 September 1985 replacement share - the taxpayer shall be deemed to have paid or given as consideration in respect of the acquisition of the share an amount equal to:

(i) for the purpose of ascertaining whether a capital gain accrued to the taxpayer in the event of a subsequent disposal of the share by the taxpayer - the amount calculated in accordance with the formula:

ICB of post CGT units Post CGT shares

where:

ICB of post CGT units is the sum of the amounts that would have been the indexed cost bases to the taxpayer of post-20 September 1985 exchange units for the purposes of this Part if this Part had applied in respect of the disposal of the units by the taxpayer to the interposed company; and

Post CGT shares is the number of post-20 September 1985 replacement shares owned by the taxpayer immediately after the completion time; or

(ii) for the purposes of ascertaining whether the taxpayer incurred a capital loss in the event of a subsequent disposal of the share by the taxpayer - the amount calculated in accordance with the formula:

RCB of post CGT units Post CGT shares

where:

RCB of post CGT units is the sum of the amounts that would have been the reduced cost bases to the taxpayer of post-20 September 1985 exchange units for the purposes of this Part if this Part had applied in respect of the disposal of the units by the taxpayer to the interposed company; and

Post CGT shares is the number of post-20 September 1985 replacement shares owned by the taxpayer immediately after the completion time.

160ZZPA(3)   [Indexed cost base - subsec (2)(g)]  

If a post-20 September 1985 replacement share is disposed of by an exchanging taxpayer within 12 months after the earliest day, being a day after 19 September 1985, on which any exchange unit was acquired by the taxpayer, the reference in paragraph (2)(g) to the indexed cost bases to the taxpayer of units is a reference to the cost bases to the taxpayer of the units.

160ZZPA(4)   [Mode of making election]  

An election by a taxpayer under subsection (2) shall be made by notice in writing given to the Commissioner on or before the date of lodgment of the return of income of the taxpayer for the year of income in which the disposal of the exchange units concerned took place, or within such further period as the Commissioner allows.

160ZZPA(5)   [Units deemed to be acquired pre 20/9/85]  

If:

(a) any of the assets of the unit trust, as at the completion time, were acquired by the trustee of the unit trust before 20 September 1985;

(b) the interposed company, by notice in writing accompanying the notice referred to in paragraph (1)(n), nominates, as pre-CGT units, such of the exchange units held by the company immediately after the completion time as are specified in the notice; and

(c) the number of exchange units nominated by the company does not exceed the number calculated in accordance with the formula:

Units

×

Net value of pre CGT assets   Net value of total assets

where:

Net value of pre CGT assets is the number of dollars in the market value of the assets referred to in paragraph (a) as at the completion time reduced by the number of dollars in the liabilities of the unit trust as at that time to the extent that those liabilities are attributable to those assets;

Units is the number of exchange units held by the company immediately after the completion time; and

Net value of total assets is the number of dollars in the market value of the assets of the unit trust as at the completion time reduced by the number of dollars in the liabilities of the unit trust as at that time;

the units so nominated shall be deemed, for the purposes of this Part, to have been acquired by the interposed company before 20 September 1985.

160ZZPA(6)   [Units deemed acquired after 20/9/85]  

Any other exchange units held by the interposed company immediately after the completion time shall be taken to be post-20 September 1985 exchange units for the purposes of subsections (7) and (8).

160ZZPA(7)   [Consideration for post 20/9/85 units]  

The interposed company shall be deemed to have paid or given as consideration in respect of the acquisition of each post-20 September 1985 exchange unit an amount equal to:

(a) for the purpose of ascertaining whether a capital gain accrued to the company in the event of a subsequent disposal of the unit by the company - the amount calculated in accordance with the formula:

Net ICB of post CGT assets Post CGT units

where:

Net ICB of post CGT assets is the sum of the amounts that would have been the indexed cost bases to the trustee of the unit trust, for the purposes of this Part, of such of the assets of the unit trust, as at the completion time, as were acquired by the trustee on or after 20 September 1985 if those assets of the trust had been disposed of by the trustee at the completion time, being that sum reduced by the liabilities of the unit trust as at the completion time to the extent that those liabilities are attributable to those assets; and

Post CGT units is the number of post-20 September 1985 exchange units held by the company immediately after the completion time; or

(b) for the purposes of ascertaining whether the company incurred a capital loss in the event of a subsequent disposal of the unit by the company - the amount calculated in accordance with the formula:

Net RCB of post CGT assets Post CGT units

where:

Net RCB of post CGT assets is the sum of the amounts that would have been the reduced cost bases to the trustee of the unit trust, for the purposes of this Part, of such of the assets of the unit trust, as at the completion time, as were acquired by the trustee on or after 20 September 1985 if those assets had been disposed of by the trustee at the completion time, being that sum reduced by the liabilities of the unit trust as at the completion time to the extent that those liabilities are attributable to those assets; and

Post CGT units is the number of post-20 September 1985 exchange units held by the company immediately after the completion time.

160ZZPA(8)   [Indexed cost base - subsec (7)(a)]  

If a post-20 September 1985 exchange unit is disposed of by the interposed company within 12 months after the day on which the unit was acquired by the company, the reference in paragraph (7)(a) to the indexed cost bases to the trustee of assets is a reference to the cost bases to the trustee of the assets.

160ZZPA(9)   [Non-redeemable share]  

For the purposes of this section, a share issued by a company shall be taken to be a non-redeemable share unless:

(a) the share is, or at the option of the company is to be, liable to be redeemed; or

(b) the share was issued under, or as part of, an agreement or arrangement, whether oral or in writing and whether entered into before or after the commencement of this section, that had the purpose, or purposes that included the purpose, of enabling the company, by means of the redemption, purchase or cancellation of that share or of any other share in the company, or a distribution of the share capital of the company to pay, transfer or apply to, on behalf of or at the direction of the person to whom the share was issued or any other person, whether upon the exercise of an option by the company or by any other person or not, any money or other property other than shares in the company.

160ZZPA(10)   [Commissioner's relieving discretion]  

Where:

(a) immediately after the completion time, the exchanging taxpayers are the owners of some, but not all, of the shares in the interposed company;

(b) the number of the remaining shares does not exceed 5; and

(c) the Commissioner is of the opinion that, having regard to:

(i) the ratio calculated in accordance with the formula:

MV of remaining shares MV of total shares

where:

MV of remaining shares is the number of dollars in the market value of the remaining shares immediately after the completion time; and

MV of total shares is the number of dollars in the market value of the replacement shares immediately after the completion time; and

(ii) such other matters as the Commissioner considers relevant;

it would be unreasonable not to treat the exchanging taxpayers as being the owners of all the shares in the interposed company;

the following provisions have effect:

(d) the exchanging taxpayers shall be treated, for the purposes of subparagraph (1)(e)(i), as if, immediately after the completion time, they were the owners of all the shares in the interposed company;

(e) the remaining shares shall be disregarded for the purposes of the application of paragraph (1)(k).

160ZZPA(11)   [Liabilities of unit trust]  

For the purposes of this section, the liabilities of the unit trust, as at the completion time, to the extent that, apart from this subsection, they are not attributable to the assets of the unit trust as at the completion time (in this subsection called the ``general liabilities'' ), shall be taken to be attributable to particular assets of the unit trust, as at that time, to the extent calculated in accordance with the formula:

General liabilities

×

MV of particular assets   MV of total assets

where:

General liabilities is the amount of the general liabilities;

MV of particular assets is the number of dollars in the market value, as at the completion time, of the particular assets as at that time; and

MV of total assets is the number of dollars in the market value, as at the completion time, of the assets of the unit trust as at that time.