Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 727 - Indirect value shifting affecting interests in companies and trusts, and arising from non-arm ' s length dealings  

Subdivision 727-H - The adjustable value method  

Consequences of the method for various kinds of assets

SECTION 727-840   Revenue assets  

727-840(1)    
This section deals with:

(a) how this Division applies to an ^* equity or loan interest that is a ^* revenue asset of an entity at the time (the adjustment time ) immediately before the ^* IVS time; and

(b) the income tax consequences of this Division reducing or uplifting the ^* adjustable value of the interest.

727-840(2)    
The interest ' s adjustable value at a particular time is the total of the amounts that would be subtracted from the gross disposal proceeds in calculating any profit or loss on disposal of the interest if the entity disposed of it at that time.

727-840(3)    
If this Division reduces or uplifts the interest ' s ^* adjustable value, the entity is treated as if:

(a) immediately before the adjustment time, the entity had sold the interest to someone else (at ^* arm ' s length and in the ordinary course of business) for its adjustable value immediately before that time; and

(b) immediately after the adjustment time, the entity had bought the interest back for the reduced or uplifted adjustable value.

Note:

The notional sale and repurchase are separated in time. As a result, if this section is applied to another indirect value shift that happens later in the same income year, the interest ' s adjustable value will be based on the cost on the notional repurchase: see subsection (2).

727-840(4)    

However, an uplift in the ^* adjustable value of the interest is taken into account only to the extent that the amount of the uplift is still reflected in the *market value of the interest when it is disposed of or otherwise realised.

727-840(5)    
If this Division provides for the ^* adjustable value of the interest to be both reduced and uplifted:

(a) the reduction and uplift offset each other to the extent of whichever of them is the lesser, and subsection (3) of this section applies accordingly; but

(b) to the extent that the amount of the uplift is no longer reflected in the *market value of the interest, this section is taken always to have applied on the basis that the amount of the uplift was reduced to the same extent.