Tax Laws Amendment (2007 Measures No. 5) Act 2007 (164 of 2007)
Schedule 8 Australian property trusts and stapled securities
Part 1 Main amendments
Income Tax Assessment Act 1997
6 At the end of Division 124
Add:
Subdivision 124-Q - Exchange of stapled ownership interests for ownership interests in a unit trust
Guide to Subdivision 124-Q
124-1040 What this Subdivision is about
There is a roll-over if you own ownership interests that are stapled and, as a result of a reorganisation, you stop owning those interests and you acquire or own ownership interests in an interposed unit trust.
Table of sections
Operative provisions
124-1045 Exchange of stapled securities
124-1050 Conditions
124-1055 Consequences of the roll-over for exchanging members
124-1060 Consequences of the roll-over for interposed trust
124-1065 Certain foreign holders disregarded
Operative provisions
124-1045 Exchange of stapled securities
(1) There is a roll-over if:
(a) you own *ownership interests in 2 or more trusts, or in one or more companies and one or more trusts, and those interests are stapled together to form stapled securities; and
(b) at least one of the trusts is a trust whose trustee is not assessed and liable to pay tax under Division 6B or 6C of Part III of the Income Tax Assessment Act 1936; and
(c) if no company is involved - at least one of the trusts is a trust whose trustee is assessed and liable to pay tax under Division 6B or 6C of Part III of that Act; and
(d) under a *scheme for reorganising the affairs of the relevant *stapled entities, you and the other entities that own the ownership interests in the stapled entities (together the exchanging members ):
(i) stop being the owner of those ownership interests and acquire ownership interests in a new unit trust (the interposed trust ) and nothing else (a new trust case ); or
(ii) retain their ownership interests in one of those trusts (also the interposed trust ), stop being the owner of the remaining ownership interests that form the stapled securities and receive nothing other than ownership interests in the interposed trust, or an increase in value of their existing ownership interests in the interposed trust, or both (an existing trust case ); and
(e) under the scheme, the interposed trust becomes the owner of:
(i) for a new trust case - all of the ownership interests in the stapled entities; or
(ii) for an existing trust case - all of the ownership interests in the other stapled entities; and
(f) the conditions in section 124-1050 are satisfied.
Note: Division 6B of Part III of the Income Tax Assessment Act 1936 deals with taxing corporate unit trusts in the same way as companies. Division 6C has the same effect in relation to public trading trusts.
(2) An entity is a stapled entity in relation to stapled securities if *ownership interests in the entity form part of the stapled securities.
(3) Ignore for the purposes of subsection (1) *ownership interests held by one *stapled entity in another stapled entity as at the start of the day on which the Bill for this Act was introduced into the Parliament.
124-1050 Conditions
(1) Just after the *scheme is completed (the completion time ), each exchanging member must own a percentage of the *ownership interests in the interposed trust that reasonably equates to the percentage of the ownership interests that the member owned in the *stapled entities.
Example: Public Company A, Unit Trust No. 1 and Unit Trust No. 2 are stapled entities. Each stapled entity has 4,000 ownership interests on issue. There are no ownership interests in any of the stapled entities other than shares in the company and units in the trusts.
Under a scheme for reorganising the stapled entities, Unit Trust No. 3 is interposed between the stapled entities and the owners of the interests in those entities. Unit Trust No. 3 (the interposed trust) becomes the owner of all of the interests in each of the three stapled entities. Exchanging members receive one unit in the interposed trust for each stapled security they owned. All units in the interposed trust are of the same class.
Naomi owned 200 shares in Public Company A, 200 units in Unit Trust No. 1 and 200 units in Unit Trust No. 2. Naomi therefore owned 5% of the ownership interests in each of the stapled entities. Under the scheme, Naomi receives 100 units in Unit Trust No. 3 (out of a total of 2,000 units) in exchange for her ownership interests in the stapled entities. Naomi now owns 5% of the ownership interests in the interposed trust and meets the condition in subsection (1).
(2) Just after the completion time, each exchanging member must have the same, or as nearly as practicable the same, proportionate *market value of *ownership interests in the interposed trust as the member had in the *stapled entities just before that time.
(3) In working out whether an exchanging member complies with subsection (2), an anticipated reasonable approximation of the *market value of *ownership interests just after the completion time is sufficient.
Note: An anticipated reasonable approximation of market values of ownership interests may include valuations provided to exchanging members in scheme documents.
(4) You must be an Australian resident at the completion time or, if you are a foreign resident at that time:
(a) some or all of your *ownership interests in the *stapled entities must have been *taxable Australian property just before that time; and
(b) your ownership interests in the interposed trust must be taxable Australian property just after that time.
124-1055 Consequences of the roll-over for exchanging members
(1) A *capital gain or *capital loss you make as a result of the *scheme from each of your *ownership interests is disregarded.
(2) If you *acquired all of your *ownership interests in the *stapled entities on or after 20 September 1985, the first element of the *cost base and *reduced cost base of each of your ownership interests in the interposed trust is such amount as is reasonable having regard to:
(a) the total of the *cost bases of all of your ownership interests in the *stapled entities; and
(b) the number, *market value and character of your ownership interests in the interposed trust.
Example: Naomi had a cost base of $2.00 for each of her 200 Public Company A shares, $1.50 for each of her 200 Unit Trust No. 1 units and $0.50 for each of her 200 Unit Trust No. 2 units. The total of the cost bases of all of her membership interests is $800.00.
It is reasonable to allocate $8.00 to each of the 100 units in the interposed trust that she receives under the reorganisation.
(3) If you *acquired all of your *ownership interests in the *stapled entities before 20 September 1985, you are taken to have acquired all of your ownership interests in the interposed trust before that day.
(4) If you *acquired some of your *ownership interests in the *stapled entities before 20 September 1985, you are taken to have acquired so many of your ownership interests in the interposed trust as is reasonable before that day having regard to:
(a) the number, *market value and character of your ownership interests in the stapled entities; and
(b) the number, market value and character of your ownership interests in the interposed trust.
Note: Generally, a capital gain or capital loss from a CGT asset acquired before 20 September 1985 can be disregarded: see Division 104.
(5) The first element of the *cost base and *reduced cost base of each of your *ownership interests in the interposed trust that is not taken by subsection (4) to have been *acquired before 20 September 1985 (your post-CGT interests ) is such amount as is reasonable having regard to:
(a) the total of the cost bases of your ownership interests in the *stapled entities that you acquired on or after 20 September 1985; and
(b) the number, *market value and character of your post-CGT interests.
124-1060 Consequences of the roll-over for interposed trust
(1) Apply this section separately for the interposed trust in relation to the *ownership interests in each *stapled entity that the trustee of the interposed trust *acquires under the *scheme.
(2) A whole number of *ownership interests in a *stapled entity that the trustee *acquires under the *scheme are taken to have been acquired before 20 September 1985 if any of the stapled entity's assets as at the completion time were acquired by it before that day.
Note: Generally, a capital gain or capital loss from a CGT asset acquired before 20 September 1985 can be disregarded: see Division 104.
(3) The number (worked out as at the completion time) is the greatest possible that (when expressed as a percentage of all the *ownership interests in the *stapled entity *acquired by the trustee) does not exceed:
(a) the *market value of the stapled entity's assets that it acquired before 20 September 1985; less
(b) its liabilities (if any) in respect of those assets;
expressed as a percentage of the market value of all the stapled entity's assets less all of its liabilities. The amounts in paragraphs (a) and (b) are to be worked out as at the completion time.
(4) The first element of the *cost base and *reduced cost base of each of the trustee's *ownership interests in that *stapled entity that are not taken by subsection (3) to have been *acquired before 20 September 1985 is such proportion as is reasonable of the total of the cost bases (as at the completion time) of that stapled entity's assets that it acquired on or after that day less its liabilities (if any) in respect of those assets.
(5) In applying this section:
(a) a liability of a *stapled entity that is not a liability in respect of a specific asset or assets of the stapled entity is a liability in respect of all the assets of the stapled entity; and
(b) if a liability is in respect of 2 or more assets, the proportion of the liability that is in respect of any one of those assets is such amount as is reasonable having regard to the *market values of each of those assets.
124-1065 Certain foreign holders disregarded
(1) This section has effect if:
(a) *ownership interests are owned by a foreign holder within the meaning of the Corporations Act 2001; and
(b) an agent or nominee is appointed by (or on behalf of) the foreign holder; and
(c) the interests are *disposed of to the interposed trust, or are cancelled; and
(d) as a result, the agent or nominee acquires new units or new options, rights or similar interests, or both, in the interposed trust; and
(e) the agent or nominee disposes of those ownership interests in the interposed trust (whether separately or together with other ownership interests covered by paragraph (d)); and
(f) the agent or nominee:
(i) gives the foreign holder an amount equivalent to the *capital proceeds of the disposal (less expenses); or
(ii) if the ownership interests are disposed of together with other ownership interests covered by paragraph (d) - gives the foreign holder an amount equivalent to the foreign holder's proportion of the capital proceeds of the disposal (less expenses).
(2) This Subdivision has effect as if the foreign holder were not an exchanging member.