Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-32 - CO-OPERATIVES AND MUTUAL ENTITIES  

Division 316 - Demutualisation of friendly society health or life insurers  

Subdivision 316-B - Capital gains and losses connected with the demutualisation  

Gains and losses of members, insured entities and successors

SECTION 316-60   Taking account of some capital gains and losses involving receipt of money  

316-60(1)    
This section applies if:

(a) a *CGT event happens under the demutualisation to an entity ' s interest affected by demutualisation (see section 316-55 ); and

(b) the event involves:

(i) the variation or abrogation of rights attaching to or consisting of the interest; or

(ii) the conversion, cancellation, extinguishment or redemption of the interest; and

(c) either:

(i) the entity is one described in paragraph 316-55(1)(a) ; or

(ii) the entity is one described in paragraph 316-55(2)(a) and the interest is a *CGT asset described in paragraph 316-55(2)(b) ; and

(d) the *capital proceeds from the event include or consist of money received by the entity.

316-60(2)    
Work out whether the entity makes a *capital gain or *capital loss from the *CGT event, and the amount of the gain or loss, assuming that:

(a) the *capital proceeds from the CGT event were the amount they would be if they did not include any *market value of property other than money; and

(b) the *cost base and *reduced cost base for the interest were the amount worked out using the formula:

* Capital proceeds from the * CGT event

×

Valuation factor worked out under section 316-65

Example:

Assume the entity receives $50 in money and 10 shares with a market value of $4 each in respect of CGT event C2 happening, and that the valuation factor worked out under section 316-65 is 0.9. The entity makes a capital gain from the event of $5, worked out as follows:

$ 50 − ( $ 50 × 0.9)

This ignores the market value of the shares because they are property other than money.

Note:

Division 114 (Indexation of cost base) is not relevant, because this section provides exhaustively for working out the amount of the cost base.

316-60(3)    
The *capital gain or *capital loss is not to be disregarded, despite:

(a) section 316-55 ; and

(b) any provision of this Act for disregarding the *capital gain or *capital loss because the interest affected by demutualisation was *acquired before 20 September 1985.

Note:

The capital gain is not a discount capital gain: see section 115-55 .