Tax Laws Amendment (2006 Measures No. 7) Act 2007 (55 of 2007)

Schedule 1   Small business relief for CGT events

Income Tax Assessment Act 1997

13   At the end of Subdivision 104-J

Add:

104-197 Failure to acquire replacement asset and to incur fourth element expenditure after a roll-over under Subdivision 152-E: CGT event J5

(1) CGT event J5 happens if you choose a small business roll-over under Subdivision 152-E for a *CGT event that happens in relation to a *CGT asset in an income year and, by the end of the replacement asset period:

(a) you have not *acquired a replacement asset (the replacement asset ), and have not incurred *fourth element expenditure in relation to a CGT asset (also the replacement asset ); or

(b) the replacement asset does not satisfy the conditions set out in subsection (2).

(2) The conditions are:

(a) the replacement asset must be your *active asset; and

(b) if the replacement asset is a *share in a company or an interest in a trust:

(i) you, or an entity *connected with you, must be a *CGT concession stakeholder in the company or trust; or

(ii) CGT concession stakeholders in the company or trust must have a *small business participation percentage in you of at least 90%.

Example: Joseph owns 50% of the shares in Company A and Company B. He is therefore a CGT concession stakeholder in the companies: see section 152-60. The companies are connected with Joseph (see section 152-30) because he controls both of them.

Company A owns land which it leases to Joseph for use in a business. It sells the land at a profit and buys shares in Company B.

Subsection (2) is satisfied for the shares because Joseph is connected with Company A and is a CGT concession stakeholder in Company B.

(3) The time of the event is at the end of the replacement asset period.

(4) You make a capital gain equal to the amount of the *capital gain that you disregarded under Subdivision 152-E.

(5) The replacement asset period may be modified or extended as mentioned in section 104-190.

104-198 Cost of acquisition of replacement asset or amount of fourth element expenditure, or both, not sufficient to cover disregarded capital gain: CGT event J6

(1) CGT event J6 happens if you choose a small business roll-over under Subdivision 152-E for a *CGT event that happens in relation to a *CGT asset in an income year and:

(a) by the end of the replacement asset period, you have done either or both of the following:

(i) *acquired a replacement asset (the replacement asset );

(ii) incurred *fourth element expenditure in relation to a CGT asset (also the replacement asset ); and

(b) at the end of the replacement asset period, the replacement asset is your *active asset; and

(c) if the replacement asset is a *share in a company or an interest in a trust, at the end of the replacement asset period:

(i) you, or an entity *connected with you, are a *CGT concession stakeholder in the company or trust; or

(ii) CGT concession stakeholders in the company or trust have a *small business participation percentage in you of at least 90%; and

(d) the total (the amount incurred ) of the following, in relation to each replacement asset that satisfied paragraph (b) and, if applicable, paragraph (c), is less than the amount of the capital gain that you disregarded:

(i) the first element of the *cost base;

(ii) the *incidental costs you incurred (which can include giving property, see section 103-5);

(iii) the amount of fourth element expenditure incurred.

(2) The time of the event is at the end of the replacement asset period.

(3) You make a capital gain equal to the difference between:

(a) the amount of the *capital gain that you disregarded under Subdivision 152-E; and

(b) the amount incurred.

(4) The replacement asset period may be modified or extended as mentioned in section 104-190.