INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 3 - Determination of capital gains and capital losses  

SECTION 160ZL   RETURN OF CAPITAL ON SHARES  

160ZL(1)   [Application of section]  

Where a company pays an amount that is not a dividend to a taxpayer in respect of shares in the company acquired by the taxpayer after 19 September 1985 (not being a payment in respect of the disposal of the shares), the following provisions of this section have effect for the purposes of this Part.

160ZL(2)   [Indexed cost base of shares exceeds payment]  

Subject to subsection (4), where, if the taxpayer had disposed of the shares at the time of the payment, the indexed cost base to the taxpayer in respect of the shares would have exceeded the amount of the payment, the taxpayer shall be deemed to have disposed of the shares at that time for a consideration equal to the amount of that indexed cost base and to have immediately re-acquired the shares -

(a) for the purpose of ascertaining whether a capital gain accrued to the taxpayer in the event of a subsequent disposal of the shares by the taxpayer - for a consideration equal to the amount by which that indexed cost base exceeded the amount of the payment; or

(b) for the purpose of ascertaining whether the taxpayer incurred a capital loss in the event of a subsequent disposal of the shares by the taxpayer -

(i) if, had the taxpayer disposed of the shares at the time of the payment, the reduced cost base to the taxpayer in respect of the shares would have exceeded the amount of the payment - for a consideration equal to the excess; or

(ii) if, had the taxpayer disposed of the shares at the time of the payment, the reduced cost base to the taxpayer in respect of the shares would not have exceeded the amount of the payment - without having paid or given any consideration in respect of the re-acquisition.

160ZL(3)   [Index cost base not exceeding payment]  

Where, if the taxpayer had disposed of the shares at the time of the payment, the indexed cost base to the taxpayer in respect of the shares would not have exceeded the amount of the payment -

(a) the taxpayer shall be deemed -

(i) to have disposed of the shares at that time for a consideration equal to the amount of that indexed cost base; and

(ii) to have immediately re-acquired the shares without having paid or given any consideration for the re-acquisition; and

(b) if the amount of the payment would have exceeded that indexed cost base - a capital gain equal to the excess shall be deemed to have accrued to the taxpayer at the time of the payment.

160ZL(4)   [Disposal within 12 months of acquisition of shares]  

If the taxpayer disposed of the shares (otherwise than because of the application of this section) within 12 months after the taxpayer acquired the shares (otherwise than because of the application of this section), subsections (2) and (3) have effect as if the references in those subsections to the indexed cost base to the taxpayer in respect of the shares were references to the cost base to the taxpayer in respect of those shares.

160ZL(5)