Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 16J - Effect of cancellation of subsidiary's shares in holding company  

SECTION 159GZZZG   PRE-CANCELLATION DISPOSALS OF ELIGIBLE INTERESTS  

159GZZZG(1)   [Capital proceeds in respect of disposal of eligible interest]  

Where:

(a) this Division applies to a cancellation of shares;

(b) during the pre-cancellation period, there is a disposal of an eligible interest held by an eligible entity in relation to the holding company and the subsidiary concerned; and

(c) apart from this section, either:

(i) the eligible entity would not have received or been entitled to receive any capital proceeds in respect of the disposal; or

(ii) the capital proceeds that the eligible entity would have received or been entitled to receive in respect of the disposal would have been less than the adjusted market value of the eligible interest;

the following provisions have effect for the purposes of this Act:

(d) where subparagraph (c)(i) applies - the eligible entity shall be taken to have received or to have been entitled to receive, as capital proceeds in respect of the disposal, an amount equal to the adjusted market value of the eligible interest;

(e) where subparagraph (c)(ii) applies - the amount of the capital proceeds that the eligible entity received or was entitled to receive in respect of the disposal shall be taken to be increased by an amount so that it equals the adjusted market value of the eligible interest.

159GZZZG(2)   [Adjusted market value]  

For the purposes of subsection (1), the adjusted market value of the eligible interest is the amount that would have been its market value at the time of the disposal if the cancellation of the shares to which this Division applies did not occur and was never proposed to occur.