Taxation Determination
TD 2005/54
Income tax: consolidation: asset cost setting rules: where the cost and value of the reset cost base assets of a joining entity are so small or trifling that they are de minimis, can they be ignored when determining whether a CGT event L4 loss is available under section 104-515 of the Income Tax Assessment Act 1997?
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FOI status:
may be releasedPreamble
| The number, subject heading, date of effect and paragraphs 1 and 6 of this document are a 'public ruling' for the purposes of Part IVAAA of the Taxation Administration Act 1953 and are legally binding on the Commissioner. |
2. Division 705 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with setting the tax cost for assets of an entity that becomes a subsidiary member of a consolidated group. An allocable cost amount (ACA) is worked out for the joining entity and, after working out the tax cost setting amounts for retained cost base assets, any remainder of the ACA is allocated to reset cost base assets under section 705-35 of the ITAA 1997. Where there are no reset cost base assets, the remainder of the ACA becomes a CGT loss under event L4: section 104-515 of the ITAA 1997.
3. Where the sum of the costs of reset cost base assets and the sum of their market values are very small or trifling those assets could be ignored for the purpose of allocating ACA under section 705-35 and for the purpose of applying paragraph 104-515(1)(c).
4. The Commissioner considers that the situation noted in paragraph 3 of this Ruling is a case for the application of the principle that the law is not concerned with trifles (de minimis non curat lex). In Farnell Electronic Components Pty Ltd v. Collector of Customs (1996) 142 ALR 322, Hill J confirmed that the de minimis principle is a principle of statutory interpretation. At page 324, he quoted, with approval, the following passage from Halsbury's Laws of England, 4th ed, vol 44(1), at paragraph 1441:
De minimis principle. Unless the contrary intention appears, an enactment by implication imports the principle of legal policy expressed in the maxim de minimis non curat lex (the law does not concern itself with trifling matters); so if an enactment is expressed to apply to matters of a certain description it will not apply where the description is satisfied only to a very small extent.
5. The principle has been recognised in the application of statutory rules to contracts (for example Shipton, Anderson & Co v. Weil Brothers & Co [1912] 1 KB 574 at 577), to criminal law (for example Williams v. The Queen (1978) 140 CLR 591 at 602) and in a number of income tax cases (for example National Mutual Life Association v. FC of T 70 ATC 4134 at 4137; J Hammond Investments Pty Limited v. FC of T 77 ATC 4311 at 4318; Garrett v. FC of T 82 ATC 4060 at 4065; FC of T v. Elton 90 ATC 4078 at 4082; Industry Research and Development Board v. Unisys Info Services 97 ATC 4848 at 4852).
6. The Commissioner does not consider that there is any intention to exclude the de minimis principle in the interpretation of sections 705-35 and 104-515. What is de minimis in any particular case would depend on all the facts and circumstances including the relative cost and value of the relevant assets compared with the ACA of the joining entity.
Date of effect
7. This Determination applies to years commencing both before and after its date of issue. However, it does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).
Commissioner of Taxation
21 December 2005
Previously issued as TD 2005/D47
References
ATO references:
NO 2005/14504
Related Rulings/Determinations:
TR 92/20
Subject References:
asset cost setting
consolidation
de minimis principle
reset cost base asset
Legislative References:
TAA 1953 Pt IVAAA
ITAA 1997 Div 705
ITAA 1997 705-35
ITAA 1997 104-515
ITAA 1997 104-515(1)(c)
Case References:
Farnell Electronic Components Pty Ltd v. Collector of Customs
(1996) 142 ALR 322
72 FCR 125
FC of T v. Elton
(1990) 90 ATC 4078
20 ATR 1796
Garrett v. FC of T
(1982) 58 FLR 101
82 ATC 4060
12 ATR 684
Industry Research and Development Board v. Unisys Info Services
(1997) 37 ATR 62
97 ATC 4848
J Hammond Investments Pty Limited v. FC of T
(1977) 77 ATC 4311
7 ATR 633
(1977) 31 FLR 349
National Mutual Life Association v. FC of T
70 ATC 4134
2 ATR 151
122 CLR 13
Shipton, Anderson & Co v. Weil Brothers & Co
[1912] 1 KB 574
Williams v. The Queen
(1978) 140 CLR 591
Other References:
Halsbury's Laws of England, 4th ed, vol 44(1)