Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-3 - CAPITAL GAINS AND LOSSES: SPECIAL TOPICS  

Division 124 - Replacement-asset roll-overs  

Subdivision 124-M - Scrip for scrip roll-over  

Operative provisions

SECTION 124-784B   What is the cost base and reduced cost base when arrangement is a restructure?  

124-784B(1)    
This section applies in relation to each qualifying interest in the original entity:

(a) *acquired by an acquiring entity under an *arrangement to which section 124-784A applies; and

(b) for which the first element of the *cost base of the acquiring entity is not worked out under section 124-782 .

Note:

Section 124-782 applies when an original interest holder is a significant stakeholder or a common stakeholder.

First element of cost base - qualifying interests acquired in exchange for replacement interests only

124-784B(2)    

The first element of the *cost base of the acquiring entity for the qualifying interest in the original entity is worked out as follows: Method statement

Note 1:

For the purposes of this subsection, Division 701 (Core rules for consolidated groups) is disregarded for an original entity that becomes a subsidiary member of a consolidated group or MEC group under the arrangement (see paragraph 715-910(1)(a) ).

Note 2:

If the original entity is the head company of a consolidated group or MEC group, then subsection 701-1(1) (the single entity rule) and section 701-5 (the entry history rule) apply in relation to that group when working out steps 1 and 2 (see subsection 715-910(2) ).

Note 3:

For step 5, the replacement entity may choose to use the officially quoted price of the qualifying interests as their market value (see subsection 124-784A(3) ).

First element of cost base - interests acquired in exchange for replacement interests and cash etc.

124-784B(3)    
However, if the qualifying interest was acquired under the *arrangement partly in exchange for one or more replacement interests and partly for something else, subsection (2) applies only for working out the first element of that part of the *cost base of the qualifying interest that is attributable to the replacement interests.

Note 1:

This means that the acquiring entity will have to apportion the cost base amount worked out under subsection (2) according to the relative values of the replacement interests and the other component.

Note 2:

The first element of that part of the cost base, and reduced cost base, of the qualifying interest that is attributable to cash etc. is worked out using the general rules about cost base.

Liabilities

124-784B(4)    
For the purposes of step 4 of subsection (2), a liability of the original entity that is not a liability in respect of a specific asset or assets of the entity is taken to be a liability in respect of all the assets of the entity.

124-784B(5)    
If a liability is in respect of 2 or more assets, the proportion of the liability that is in respect of any one of those assets is equal to:

The *market value of the asset

The total of the *market values of all the assets that the liability is in respect of

First element of reduced cost base

124-784B(6)    
The first element of the *reduced cost base of the acquiring entity for the qualifying interest in the original entity is worked out similarly.

Rights and options to acquire membership interests

124-784B(7)    
For the purposes of step 5 of subsection (2), if at the completion time a person holds an option, right or similar interest (including a contingent option, right or interest), created or issued by the original entity, to acquire a *membership interest in the original entity, that option, right or interest is treated as if it were a membership interest in the original entity.