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-N - Disposal of assets by a trust to a company  

Operative provisions

SECTION 124-860   Requirements for roll-over  

124-860(1)    
All of the *CGT assets owned by the transferor must be disposed of to the transferee during the *trust restructuring period. However, ignore any CGT assets retained by the transferor to pay existing or expected debts of the transferor.

124-860(2)    
The trust restructuring period for a trust restructure:

(a) starts just before the first *CGT asset is *disposed of to the transferee under the trust restructure, which must happen on or after 11 November 1999; and

(b) ends when the last CGT asset of the transferor is disposed of to the transferee.

124-860(3)    
The transferee must not be an *exempt entity.

124-860(4)    
The transferee must be a company that:

(a) has never carried on commercial activities; and

(b) has no *CGT assets, other than any or all of the following:

(i) small amounts of cash or debt;

(ii) its rights under an *arrangement, if (collectively) those rights only facilitate the transfer of assets to the transferee from the transferor; and

(c) has no losses of any kind.

Example:

It could be a shelf company.

124-860(5)    
Subsection (4) does not apply to a transferee that is the trustee of the transferor.

124-860(6)    
Just after the end of the *trust restructuring period:

(a) each entity that owned interests in a transferor just before the start of the trust restructuring period must own replacement interests in the transferee in the same proportion as it owned those interests in that transferor; and

(b) the *market value of the replacement interests each of those entities owns in the transferee must be at least substantially the same as the market value of the interests it owned in the transferor or transferors just before the start of the trust restructuring period.

Note 1:

Any assets in the company just before the start of the trust restructuring period may affect the ability of owners of units or interests to comply with paragraph (6)(b).

Note 2:

See section 124-20 if an entity uses an interest sale facility.

124-860(7)    
For the purposes of subsection (6), ignore any *shares in the transferee that:

(a) just before the start of the *trust restructuring period, were owned by entities who together owned no more than 5 shares; and

(b) just after the end of that period, represented such a low percentage of the total *market value of all the shares that it is reasonable to treat other entities as if they owned all the shares in the transferee.

Example:

To continue the example in subsection 124-855(2) , assume that Jonathon Pty Ltd was a shelf company organised for Matthew and Jaclyn by their solicitor, Indira.

Indira owned the 2 shares in Jonathon Pty Ltd before the trust restructuring period. The company issues Matthew and Jaclyn 5,000 shares each.

In these circumstances, it is reasonable to treat Matthew and Jaclyn as if they owned all the shares in Jonathon Pty Ltd.

124-860(8)    
(Repealed by No 168 of 2006 )