Tax Laws Amendment (2004 Measures No. 6) Act 2005 (23 of 2005)

Schedule 12   Transfer of life insurance business

Income Tax (Transitional Provisions) Act 1997

8   At the end of Division 126

Add:

Subdivision 126-B - Transfer of life insurance business

Table of sections

126-150 Roll-over on transfer of life insurance business

126-155 When there is a roll-over

126-160 Effects of roll-over

126-165 References to Subdivision 126-B of the Income Tax Assessment Act 1997

126-150 Roll-over on transfer of life insurance business

(1) There may be a roll-over if:

(a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company ) is transferred to another life insurance company (the recipient company ):

(i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or

(ii) under the Financial Sector (Transfers of Business) Act 1999; and

(b) the originating company and the recipient company were members of the same wholly-owned group just before the transfer; and

(c) one of these happens:

(i) a CGT asset (the original asset ) of the originating company becomes an asset of the recipient company; or

(ii) a CGT asset of the originating company ends and the recipient company acquires an equivalent replacement asset; or

(iii) the originating company creates a CGT asset in the recipient company; and

(d) the transfer takes place:

(i) before 30 June 2004; or

(ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period - before the end of the head company's income year in which 30 June 2004 occurs.

(2) The CGT asset involved (the roll-over asset ) must not be trading stock of the recipient company just after the time of the transfer.

(3) If:

(a) the roll-over asset is a right or convertible note referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997; and

(b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible note;

the other asset cannot become trading stock of the recipient company just after the recipient company acquired it.

126-155 When there is a roll-over

(1) There is a roll-over if:

(a) either:

(i) the CGT event would have resulted in the originating company making a capital gain, or making no capital loss and not being entitled to a deduction; or

(ii) the originating company acquired the roll-over asset before 20 September 1985; and

(b) the originating company and recipient company both choose in writing to obtain a roll-over.

(2) There is also a roll-over if the CGT event would have resulted in the originating company making a capital loss and the originating company and recipient company both choose in writing to obtain a roll-over.

(3) Any such choice must be made by the later of:

(a) 12 months after the day on which the Tax Laws Amendment (2004 Measures No. 6) Act 2005 received the Royal Assent; and

(b) a later day allowed by the Commissioner.

126-160 Effects of roll-over

(1) A capital gain or capital loss the originating company makes from the CGT event is disregarded.

(2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event.

(3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly.

(4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset's cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly.

The expenditure can include giving property: see section 103-5 of the Income Tax Assessment Act 1997.

(5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day.

126-165 References to Subdivision 126-B of the Income Tax Assessment Act 1997

A reference in an Act to a roll-over under Subdivision 126-B of the Income Tax Assessment Act 1997 includes a reference to a roll-over under this Subdivision.

Example: Examples of the operation of this provision include:

(a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll-over under this Subdivision; and

(b) a tax cost setting amount may be affected under section 705-50 because of a roll-over under this Subdivision; and

(c) an allocable cost amount may be affected under section 705-150 because of a roll-over under this Subdivision.