Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 115 - Discount capital gains and trusts ' net capital gains  

Subdivision 115-A - Discount capital gains  

What are not discount capital gains?

SECTION 115-50   Discount capital gain from equity in certain entities  

Capital gain from share in company with 300 members

115-50(1)    
Section 115-45 does not prevent a *capital gain from a *CGT event happening to a *share in a company with at least 300 *members from being a *discount capital gain, unless subsection (3) or (6) applies in relation to the company.

Capital gain from interest in fixed trust with 300 beneficiaries

115-50(2)    
Section 115-45 does not prevent a *capital gain from a *CGT event happening to an interest in a trust from being a *discount capital gain if:

(a) entities have *fixed entitlements to all of the income and capital of the trust; and

(b) the trust has at least 300 beneficiaries; and

(c) neither subsection (4) nor subsection (6) applies in relation to the trust.

No discount capital gain if ownership is concentrated

115-50(3)    
Section 115-45 may prevent a *capital gain from a *share in a company from being a *discount capital gain if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, *shares in the company:

(a) carrying *fixed entitlements to:

(i) at least 75% of the company's income; or

(ii) at least 75% of the company's capital; or

(b) carrying at least 75% of the voting rights in the company.

115-50(4)    
Section 115-45 may prevent a *capital gain from an interest in a trust from being a *discount capital gain if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, interests in the trust:

(a) carrying *fixed entitlements to:

(i) at least 75% of the trust's income; or

(ii) at least 75% of the trust's capital; or

(b) if beneficiaries of the trust have a right to vote in respect of activities of the trust - carrying at least 75% of those voting rights.

115-50(5)    
Subsections (3) and (4) operate as if all of these were a single individual:

(a) an individual, whether or not the individual holds *shares in the company or interests in the trust (as appropriate);

(b) the individual's *associates;

(c) for any *shares or interests in respect of which other individuals are nominees of the individual or of the individual's associates - those other individuals.

No discount capital gain if rights can be varied to concentrate ownership

115-50(6)    
Section 115-45 may prevent a *capital gain from a *share in a company, or from an interest in a trust, from being a *discount capital gain if, because of anything listed in subsection (7), it is reasonable to conclude that the rights attaching to any of the *shares in the company or interests in the trust (as appropriate) can be varied or abrogated in such a way that subsection (3) or (4) would be satisfied.

115-50(7)    
These are the things:

(a) any provision in the constituent document of the company or trust, or in any contract, agreement or instrument:

(i) authorising the variation or abrogation of rights attaching to any of the *shares in the company or interests in the trust (as appropriate); or

(ii) relating to the conversion, cancellation, extinguishment or redemption of any of those shares or interests;

(b) any contract, *arrangement, option or instrument under which a person has power to acquire any of those shares or interests;

(c) any power, authority or discretion in a person in relation to the rights attaching to any of those shares or interests.

115-50(8)    
It does not matter for the purposes of subsection (6) whether or not the rights attaching to any of the *shares or interests are varied or abrogated in the way described in that subsection.