INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision B - Trading Stock  

SECTION 36A   DISPOSAL ON CHANGE OF OWNERSHIP OR INTERESTS  

36A(1A)   [No application 1 July 1997 onwards]  

Subsection (1) applies to a change of ownership of, or interests in, property only if the change takes place before 1 July 1997.

Note:

Section 70-100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 deals with a change taking place on or after 1 July 1997.

36A(1)   [Application of s 36]  

Where, for any reason, including:

(a) the formation or dissolution of a partnership; or

(b) a variation in the constitution of a partnership, or in the interests of the partners,

a change has occurred in the ownership of, or in the interests of persons in, property constituting the whole or part of the assets of a business and being trading stock, standing or growing crops, crop-stools, or trees which have been planted and tended for the purpose of sale, and the person, or one or more of the persons, who owned the property before the change has or have an interest in the property after the change, section 36 applies as if the person or persons who owned the property before the change had, on the day on which the change occurred, disposed of the whole of the property to the person, or all the persons, by whom the property is owned after the change.

36A(2)   [Where 25% or more continuity]  

Where:

(a) property in relation to which subsection (1) applies has become, upon the change in ownership or interests, an asset of a business carried on by the person or persons by whom the property is owned after the change;

(b) the person or persons by whom the property was owned before the change holds or hold, after the change, an interest or interests in the property of a value equal to not less than one-quarter of the value of the property;

(c) the value of the property as ascertained in accordance with paragraph 36(8)(a) is greater than the value (if any) that would have been taken into account at the end of the year of income if no disposal had taken place and the year of income had ended on the date of the change; and

(d) the person or persons by whom the property was owned before the change together with the person or persons by whom the property is owned after the change agree that this subsection shall apply in respect of the property,

the value of the property, for the purposes of section 36 , shall be, instead of the value specified in paragraph 36(8)(a) , the value (if any) that would have been taken into account at the end of the year of income if no disposal had taken place and the year of income had ended on the date of the change.

36A(3)   [Form and time of agreement]  

An agreement under paragraph (2)(d) must be:

(a) in writing and signed by, or on behalf of, each party to the agreement; and

(b) made on or before 31 August next succeeding the end of the financial year in which the change in ownership or interests occurred or on or before such later date as the Commissioner determines.

36A(4)   [Death of partner]  

Where subsection (1) applies in relation to property in consequence of the death of a member of a partnership, the persons by whom a notice in pursuance of subsection (2) may be given shall include, in lieu of the deceased person, the trustee of his estate and the beneficiaries (if any) who are liable to be assessed in respect of the whole or a share in the income of the business of which the property becomes an asset.

36A(5)   [Notice re share, stock, debenture, note or other chose in action]  

A notice for the purposes of subsection (2) given on or after 24 May 1977, to the extent to which the notice is in respect of a change in the ownership of, or in the interests of persons in, property, being:

(a) a share or stock in the capital of a company;

(b) a debenture, note or other security issued in respect of a loan to a company; or

(c) any other chose in action,

does not have any effect unless the persons giving the notice establish to the satisfaction of the Commissioner that the change in ownership or interests occurred before that date.

36A(6)   [Notice re property not covered by subsec (5)]  

A notice for the purposes of subsection (2) given after 10 May 1979, to the extent to which the notice is in respect of a change in the ownership of, or in the interests of persons in, property, being a chose in action that is not of a kind referred to in subsection (5), does not have any effect unless the persons giving the notice establish to the satisfaction of the Commissioner that the change in ownership or interests occurred on or before that date.

36A(7)   [Determination under s 36(9)]  

Notwithstanding subsection (2), a notice for the purposes of that subsection given after 10 May 1979 does not have any effect to the extent to which the notice is in respect of a change in the ownership of, or in the interests of persons in, property:

(a) that is not a chose in action;

(b) the value of which for the purposes of section 36 is determined by the Commissioner under subsection (9) of that section; and

(c) the value of which determined under subsection (9) of that section is less than or equal to the value of the property applicable in accordance with subsection (2) of this section,

unless the persons giving the notice establish to the satisfaction of the Commissioner that the change in ownership or interests occurred on or before that date.

36A(8)   [Property not chose in action and subsec (7)(b) and (c) not applicable]  

Where:

(a) a change has occurred, otherwise than in the course of ordinary family or commercial dealing, in the ownership of, or in the interests of persons in, property that is not a chose in action and is not property to which paragraphs (7)(b) and (c) apply;

(b) a notice for the purposes of subsection (2) in respect of the change in ownership or interests was given to the Commissioner after 30 January 1981 and before the commencement of this subsection or is given to the Commissioner after the commencement of this subsection;

(c) consideration was received or receivable in connection with the change in ownership or interests by the person, or by any one of more of the persons, who owned the property before the change; and

(d) the amount or value of that consideration substantially exceeds the amount or value of the consideration that might reasonably be expected to have been received or receivable by the person or persons referred to in paragraph (c) in connection with the change in ownership or interests if the value of the property, immediately before the change, had been the value applicable in accordance with subsection (2),

then, notwithstanding subsection (2), the notice does not have any effect to the extent to which the notice is in respect of that change in ownership or interests unless the persons giving the notice establish to the satisfaction of the Commissioner that the change in ownership or interests occurred on or before 30 January 1981.

36A(9)   [Consideration receivable - subsec (8)]  

For the purposes of the application of subsection (8) in relation to a change in the ownership of, or in the interests of persons in, property, so much of any consideration received or receivable by any person in connection with the change in ownership or interests as, in the opinion of the Commissioner, may appropriately be regarded as consideration received or receivable by the person or persons who owned the property before the change in ownership or interests shall be deemed to be consideration received or receivable by that person or by those persons, as the case may be, in connection with the change in ownership or interests.

36A(10)   [Matters to be considered]  

In forming an opinion for the purposes of subsection (9) whether it is appropriate that consideration received or receivable by a person (in this section referred to as the ``relevant person'' ) in connection with a change in the ownership of, or in the interests of persons in, property should be regarded, in whole or in part, as consideration received or receivable in connection with the change in ownership or interests by the person or persons who owned the property before the change in ownership or interests, the Commissioner shall have regard to:

(a) any agreement entered into in connection with the change in ownership or interests;

(b) any agreement entered into in connection with the payment of the consideration to, or the receipt of the consideration by, the relevant person where, as a result of, or in connection with, the agreement, the person or any of the persons, who owned the property before the change in ownership or interests or any other person (other than the relevant person) will benefit from the giving of the consideration to, or the receipt of the consideration by, the relevant person;

(c) the nature of any connection (whether of a business, family or other nature) between the relevant person and the person, or any of the persons, who owned the property before the change in ownership or interests; and

(d) any other matters that the Commissioner considers relevant.

36A(11)   [Meaning of ``agreement'']  

In subsection (10), ``agreement'' means any agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

36A(12)   [Interpretation]  

In subsections (8), (9) and (10), a reference to consideration received or receivable by a person in connection with a change in the ownership of, or in the interests of persons in, property includes a reference to the amount or value of any benefit obtained, or that may reasonably be expected to be obtained, by the person in connection with that change in ownership or interests.