Tax Laws Amendment (2011 Measures No. 9) Act 2012 (12 of 2012)
Schedule 2 Capital gains tax and certain business restructures
Part 3 Roll-overs for change of incorporation
Division 1 Main amendments
Income Tax Assessment Act 1997
16 Before Part 3-90
Insert:
Part 3-80 - Roll-overs applying to assets generally
Division 620 - Assets of wound-up corporation passing to corporation with not significantly different ownership
Table of Subdivisions
620-A Corporations covered by Subdivision 124-I
Subdivision 620-A - Corporations covered by Subdivision 124-I
Guide to Subdivision 620-A
620-5 What this Subdivision is about
There are tax-neutral consequences of a body, that is incorporated under one law and ceases to exist, disposing of an asset to a company incorporated under another law, if the ownership of the company is not significantly different from the ownership of the body.
Table of sections
Application and object of this Subdivision
620-10 Application
620-15 Object
CGT consequences
620-20 Disregard body’s capital gains and losses from CGT assets
620-25 Cost base and pre-CGT status of CGT asset for company
Consequences for depreciating assets
620-30 Roll-over relief for balancing adjustment events
Consequences for trading stock
620-40 Body taken to have sold trading stock to company
Consequences for revenue assets
620-50 Body taken to have sold revenue assets to company
Application and object of this Subdivision
620-10 Application
This Subdivision applies to a body that is incorporated under one law and ceases to exist, and to a company incorporated under another law, if section 124-525 applies in relation to the body and the company.
Note: That section applies if the ownership of the company is not significantly different from the ownership of the body and rights relating to the body.
620-15 Object
The object of this Subdivision is to ensure tax-neutral consequences when the body ceases to hold an asset and also if the asset becomes held by the company.
CGT consequences
620-20 Disregard body’s capital gains and losses from CGT assets
(1) This section applies if:
(a) the body *disposes of a *CGT asset to the company because the body ceases to exist; or
(b) another *CGT event happens to a CGT asset of the body because the body ceases to exist.
(2) A *capital gain or a *capital loss the body makes from the *CGT asset is disregarded.
620-25 Cost base and pre-CGT status of CGT asset for company
(1) This section applies to a *CGT asset if the body *disposes of it to the company because the body ceases to exist.
(2) The first element of the *CGT asset’s *cost base for the company is equal to the asset’s cost base for the body in connection with the *disposal.
(3) The first element of the *CGT asset’s *reduced cost base for the company is worked out similarly.
(4) If the body *acquired the *CGT asset before 20 September 1985, the company is taken to have acquired the CGT asset before that day.
Consequences for depreciating assets
620-30 Roll-over relief for balancing adjustment events
(1) This section applies if:
(a) there is a *balancing adjustment event because the body disposes of a *depreciating asset in an income year to the company because the body ceases to exist; and
(b) the disposal involves a *CGT event.
(2) This Act applies as if:
(a) there were roll-over relief under subsection 40-340(1) for the *balancing adjustment event; and
(b) the body were the transferor mentioned in that subsection and subsection 328-243(1A); and
(c) the company were the transferee mentioned in that subsection and subsection 328-243(1A).
Note: Some effects of this are as follows:
(a) the balancing adjustment event does not affect the body’s assessable income or deductions (see subsection 40-345(1));
(b) the company can deduct for the decline in value of the asset on the same basis as the body did (see subsection 40-345(2));
(c) Division 45 (Disposal of leases and leased plant) applies to the company as if it had done the things the body did (see subsection 40-350(1)).
(3) Disregard paragraph 328-243(1A)(c) in determining whether subsection 328-243(1A) applies.
Consequences for trading stock
620-40 Body taken to have sold trading stock to company
(1) This subsection applies to each item of *trading stock that the body disposes of to the company because the body ceases to exist.
(2) The body is taken to have sold, and the company is taken to have bought, the item (in the ordinary course of *business and dealing with each other at arm’s length), at the time of the disposal (or just before that time if the disposal occurred when the body ceased to exist), for:
(a) the *cost of the item for the body; or
(b) if the body held the item as *trading stock at the start of the income year, the *value of the item for the body then.
(3) The company is taken to have held the item as *trading stock when it bought the item.
Consequences for revenue assets
620-50 Body taken to have sold revenue assets to company
Disposal
(1) Subsections (2) and (3) apply to a *CGT asset:
(a) that the body *disposes of to the company because the body ceases to exist; and
(b) that is a *revenue asset of the body just before the disposal.
Note: Trading stock and depreciating assets are not revenue assets. See section 977-50.
(2) The body is taken to have disposed of the *revenue asset to the company for an amount such that the body would not make a profit or a loss on the disposal.
(3) For the purpose of calculating any profit or loss on a future disposal of, cessation of owning, or other realisation of, the *revenue asset, the company is taken to have paid the body that amount for the disposal of the revenue asset to the company.
Ceasing to own or other realising
(4) Subsection (5) applies to a *CGT asset:
(a) that the body ceases to own, or otherwise realises, because the body ceases to exist; and
(b) that is a *revenue asset of the body just before the cessation or realisation.
Note: Trading stock and depreciating assets are not revenue assets. See section 977-50.
(5) The body is taken to have disposed of the *revenue asset for an amount such that the body would not make a profit or a loss on the disposal.