Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

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

Division 116 - Capital proceeds  

Modifications to general rules  

SECTION 116-30   Market value substitution rule: modification 1  
No capital proceeds

116-30(1)    

If you received no *capital proceeds from a *CGT event, you are taken to have received the *market value of the *CGT asset that is the subject of the event. (The market value is worked out as at the time of the event.)

Example:

You give a CGT asset to another entity. You are taken to have received the market value of the CGT asset.

There are capital proceeds

116-30(2)    

The *capital proceeds from a *CGT event are replaced with the *market value of the *CGT asset that is the subject of the event if:

(a) some or all of those proceeds cannot be valued; or

(b) those capital proceeds are more or less than the market value of the asset and:

(i) you and the entity that *acquired the asset from you did not deal with each other at *arm ' s length in connection with the event; or

(ii) the CGT event is CGT event C2 (about cancellation, surrender and similar endings).

(The market value is worked out as at the time of the event.)

116-30(2A)    

Subsection (2) does not apply if there is a partial roll-over for the *CGT event because of section 124-150 .

116-30(2B)    

Subsection (2) does not apply to a situation that would otherwise be covered by paragraph (2)(b) if the *CGT event is *CGT event C2 (about cancellation, surrender and similar endings) and the *CGT asset that is the subject of the event is:

(a) a *share in a company that has at least 300 *members and is not a company that is covered by section 116-35 ; or

(b) a unit in a unit trust that has at least 300 unit holders and is not a trust that is covered by section 116-35 .

Note:

So, for one of these assets, the capital proceeds for the cancellation will be what you actually received.

116-30(2C)    

Subsection (2) does not apply if:

(a)    you are a *complying superannuation fund, a *complying approved deposit fund or a *pooled superannuation trust; and

(b)    the *capital proceeds from the *CGT event exceed the *market value of the *CGT asset; and

(c)    assuming the capital proceeds were your *statutory income, the proceeds would be *non-arm ' s length income.

Market value for CGT events C2 and D1

116-30(3)    
Subsection (1) does not apply to:

(a) these examples of *CGT event C2:

(i) the expiry of a *CGT asset you own;

(ii) the cancellation of your *statutory licence; or

(b) *CGT event D1 (about creating contractual or other rights).

116-30(3A)    

If you need to work out the *market value of a *CGT asset that is the subject of *CGT event C2, work it out as if the event had not occurred and was never proposed to occur.

Example:

A company cancels shares you own in it. You work out the market value of the shares by disregarding the cancellation.

CGT assets the subject of certain events

116-30(4)    

To avoid doubt, the *CGT asset that is the subject of a *CGT event specified in this table is the asset so specified.

*CGT assets the subject of certain events
For this *CGT event:	This asset is the subject of the event:
D1	the right you created
.
D2	the option you granted
.
D3	the right you granted
.
E8	your interest or part interest in the trust capital
.
K1	(Repealed by No 77 of 2001)
.
K6	the *share or interest you *acquired before 20 September 1985

Carried interests

116-30(5)    

This section does not apply to *CGT event A1 or C2 to the extent that the CGT event is constituted by ceasing to own:

(a) the *carried interest of a *general partner in a *VCLP, an *ESVCLP or an *AFOF or a *limited partner in a *VCMP; or

(b) an entitlement to receive a payment of such a carried interest.

Note:

This section does not apply to ESS interests acquired under employee share schemes: see subsection 130-80(4) .