Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision A - Assessable income generally  

SECTION 26BB   ASSESSABILITY OF GAIN ON DISPOSAL OR REDEMPTION OF TRADITIONAL SECURITIES  

26BB(1)    

In this section:

acquire
, in relation to a security, means acquire, on issue, purchase, transfer, assignment or otherwise, the security or the right to receive payment of the amount or amounts payable under the security.

connected entity
has the same meaning as in the Income Tax Assessment Act 1997 .

dispose
, in relation to a security, means sell, transfer, assign or dispose of in any way the security or the right to receive payment of the amount or amounts payable under the security.

eligible return
has the same meaning as in Division 16E .

periodic interest
has the same meaning as in Division 16E .

security
has the same meaning as in Division 16E .

traditional security
, in relation to a taxpayer, means a security held by the taxpayer that:

(a) is or was acquired by the taxpayer after 10 May 1989;

(b) either:

(i) does not have an eligible return; or

(ii) has an eligible return, where:

(A) the precise amount of the eligible return is able to be ascertained at the time of issue of the security; and

(B) that amount is not greater than 1 ½ % of the amount calculated in accordance with the formula:

Payments   ×   Term

where:

Payments is the amount of the payment or of the sum of the payments (excluding any periodic interest) liable to be made under the security when held by any person; and

Term is the number (including any fraction) of years in the term of the security;

(c) (Repealed by No 47 of 2016)

(d) is not trading stock of the taxpayer.

26BB(2)    
Where a taxpayer disposes of a traditional security or a traditional security of a taxpayer is redeemed, the amount of any gain on the disposal or redemption shall be included in the assessable income of the taxpayer of the year of income in which the disposal or redemption takes place.

26BB(3)    
Where the Commissioner, having regard to any connection between the parties to the transaction by which the taxpayer disposed of the traditional security or by which it was redeemed, or by which the taxpayer acquired the traditional security, is satisfied that the parties were not dealing with each other at arm ' s length in relation to the transaction, then, for the purposes of determining under subsection (2) the amount of any gain on the disposal or redemption, the consideration for the transaction shall be taken to be:

(a) the amount that might reasonably be expected for the transaction if the parties were independent parties dealing at arm ' s length with each other; or

(b) where, for any reason it is not possible or practicable for the Commissioner to ascertain that amount - such amount as the Commissioner determines.

26BB(4)    

Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:

(a) the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:

(i) the issuer of the traditional security; or

(ii) a connected entity of the issuer of the traditional security; and

(b) the traditional security was issued on the basis that it will or may convert into ordinary shares in:

(i) the issuer of the traditional security; or

(ii) the connected entity.

26BB(5)    

Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:

(a) the disposal or redemption is in exchange for ordinary shares in a company that is neither:

(i) the issuer of the traditional security; nor

(ii) a connected entity of the issuer of the traditional security; and

(b) in the case of a disposal - the disposal is to:

(i) the issuer of the traditional security; or

(ii) a connected entity of the issuer of the traditional security; and

(c) the traditional security was issued on the basis that it will or may be:

(i) disposed of to the issuer of the traditional security or to the connected entity; or

(ii) redeemed;

in exchange for ordinary shares in the company.