Draft Taxation Ruling

TR 2007/D10W - Notice of Withdrawal

Income tax: capital gains: capital gains tax consequences of earnout arrangements

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Notice of Withdrawal

Draft Taxation Ruling TR 2007/D10 is withdrawn with effect from today.

1. This draft Ruling is concerned with the capital gains tax (CGT) consequences under Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997) of standard and reverse earnout arrangements.

2. Following the release of this draft Ruling, the Government announced legislative amendments to allow look-through CGT treatment for qualifying earnout arrangements on the sale of business assets. Those legislative amendments were enacted on 26 February 2016, with application to look-through earnout rights created on or after 24 April 2015.

3. This draft Ruling is being withdrawn because most earnout arrangements created on or after 24 April 2015 will qualify for look-through treatment under Subdivision 118-I of the ITAA 1997. In other cases, you can still rely on TR 2007/D10 for earnout arrangements created on or before the date of withdrawal.

4. The Commissioner has also released additional guidance to assist taxpayers to understand and apply the new legislation. That guidance confirms there has been no change to the Commissioner's view on the CGT consequences for earnout arrangements that do not satisfy the requirements for look-through treatment under Subdivision 118-I of the ITAA 1997.

5. If you have suggestions regarding any further guidance that may be required on earnout arrangements, please contact us at publicguidance@ato.gov.au.

Commissioner of Taxation
7 December 2016

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References

ATO references:
NO 1-9HT960G

Related Rulings/Determinations:

TR 2007/D10