Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS

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Division 106 - Entity making the gain or loss

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Subdivision 106-D - Securities, charges and encumbrances

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History

Subdiv 160-D substituted by No 119 of 2013, s 3 and Sch 1 item 17, applicable:

(a) to the extent the amendments affect the A New Tax System (Wine Equalisation Tax) Act 1999 - in relation to financial years commencing on or after 30 June 2013; and

(b) to the extent the amendments affect Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (about capital gains and losses) - in relation to CGT events happening on or after 30 June 2013; and

An entity may choose to have the amendments also apply, in relation to the entity:

(a) to the extent the amendments affect Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 - in relation to CGT events happening during the 2008-09 income year and later income years; and

(b) other than to the extent the amendments affect those Parts or the A New Tax System (Wine Equalisation Tax) Act 1999 - in relation to the 2008-09 income year and later income years.

Subdiv 160-D formerly read:

Subdivision 106-D - Security holders
SECTION 106-60 Acts by security holders
106-60
This Part and Part 3-3 apply to an act done by an entity (or an *agent of the entity) in relation to a *CGT asset for the purpose of enforcing or giving effect to a security, charge or encumbrance the entity holds over the asset as if the act had been done instead by the person who provided the security.
Example:

A lender sells property under a power of sale after the failure of the owner of the property to make payments on the loan. Any capital gain or loss is made by the owner of the property, not the lender.

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History

S 106-60 inserted by No 46 of 1998.

SECTION 106-60 Securities, charges and encumbrances

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106-60(1)
For the purposes of this Part and Part 3-3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity):

(a) the vesting of a * CGT asset in an entity is ignored, if:

(i) the vesting is for the purpose of enforcing, giving effect to or maintaining a security, charge or encumbrance over the asset; and

(ii) the security, charge or encumbrance remains over the asset just after the vesting; and

(b) a CGT asset is treated as vesting in an entity at the time a security, charge or encumbrance ceases to be over the asset, if:

(i) the entity holds the asset just after that time because the asset vested in the entity at an earlier time; and

(ii) that earlier vesting was ignored under paragraph (a) because it was for the purpose of enforcing, giving effect to or maintaining the security, charge or encumbrance.

106-60(2)
This Part, Part 3-3 and Subdivision 328-C apply to an act done by an entity (or an * agent of the entity) in relation to a * CGT asset for the purpose of enforcing, giving effect to or maintaining a security, charge or encumbrance over the asset as if the act had been done by the entity that provided the security (instead of by the first-mentioned entity or its agent).

Example:

A CGT asset of a borrower vests in a lender as security for a loan. No CGT event happens as a result of the vesting.

If the borrower fails to make payments on the loan and the lender sells the CGT asset under the security arrangement, any capital gain or loss is made by the borrower, not the lender.

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