INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 17 - Miscellaneous roll-over relief  

SECTION 160ZZNA   TRANSFER OF PARTNERSHIP ASSETS TO WHOLLY-OWNED COMPANY  

160ZZNA(1)   [``asset'']  

In this section:

"asset"
does not include a personal-use asset.

160ZZNA(2)   [Application of section]  

This section applies where:

(a) 2 or more taxpayers (in this section called the ``ex-partners'' ), being all of the partners in a partnership, dispose of their interests in a partnership asset of the partnership (which partnership asset is in this section called the ``eligible asset'' ) to a company; and

(b) subject to subsection (12), the consideration in respect of the disposal consists only of non-redeemable shares in the company (which shares are in this section called the ``replacement shares'' ); and

(c) the market value of the replacement shares is substantially the same as the market value of the eligible asset, reduced, if the company assumes in connection with the disposal a liability or liabilities in respect of the eligible asset, by the amount of the liability or the total of the amounts of the liabilities; and

(d) immediately after the disposal:

(i) all of the shares in the company are beneficially owned by the ex-partners; and

(ii) each ex-partner holds the shares in the company in the same proportions as the ex-partner held the ex-partner's interest in the eligible asset immediately before the disposal; and

(da) the eligible asset is not trading stock of the company immediately after its acquisition by the company; and

(db) if:

(i) the eligible asset is:

(A) a right to which Division 10 or 10A applies; or

(B) an option to which Division 11, 11A or 13 applies; or

(C) a convertible note to which Division 12 or 12A applies; and

(ii) as a result of the exercise of the right or option, or the conversion of the convertible note, the company acquires another asset (in this paragraph called the ``derived asset'' );

the derived asset is not trading stock of the company immediately after its acquisition by the company; and

(e) in the case of an ex-partner, being a taxpayer other than a taxpayer in the capacity of a trustee - one of the following subparagraphs applies:

(i) both the taxpayer and the company are residents of Australia at the time of the disposal;

(ii) all of the following conditions are satisfied:

(A) the taxpayer is not a resident of Australia at the time of the disposal;

(B) the company is a resident of Australia at the time of the disposal;

(C) the disposal is a disposal of a taxable Australian asset;

(iii) all of the following conditions are satisfied:

(A) the company is not a resident of Australia at the time of the disposal;

(B) the disposal is a disposal of a taxable Australian asset;

(C) immediately after the disposal, the eligible asset is a taxable Australian asset of the company; and

(f) in the case of an ex-partner, being a taxpayer in the capacity of a trustee of a trust estate or of a unit trust - one of the following subparagraphs applies:

(i) both of the following conditions are satisfied:

(A) the trust estate or the unit trust is a resident trust estate or a resident unit trust in relation to the year of income in which the disposal occurred;

(B) the company is a resident of Australia at the time of the disposal;

(ii) all of the following conditions are satisfied:

(A) the company is a resident of Australia at the time of the disposal;

(B) the trust estate or the unit trust is not a resident trust estate or a resident unit trust in relation to the year of income in which the disposal occurred;

(C) the disposal is a disposal of a taxable Australian asset of the trust estate or of the unit trust;

(iii) all of the following conditions are satisfied:

(A) the company is not a resident of Australia at the time of the disposal;

(B) the disposal is a disposal of a taxable Australian asset of the trust estate or of the unit trust;

(C) immediately after the disposal, the eligible asset is a taxable Australian asset of the company; and

(g) in the case of an ex-partner, being a taxpayer in the capacity of a trustee - immediately after the disposal, the ex-partner holds the replacement shares upon the same trust as the ex-partner held the ex-partner's interest in the eligible asset; and

(h) all of the ex-partners have elected that this section is to apply in relation to the disposal.

160ZZNA(3)   [Application of Pt IIIA]  

This Part (other than this section) does not apply in respect of the disposal.

160ZZNA(4)   [Pre- or post-20/9/85 eligible asset interest]  

For the purposes of this section:

(a) an interest in the eligible asset that was acquired by an ex-partner before 20 September 1985 is taken to be a pre-20 September 1985 eligible asset interest; and

(b) any other interest in the eligible asset is taken to be a post-20 September 1985 eligible asset interest.

160ZZNA(5)   [Asset deemed acquired before 20/9/85]  

If an eligible asset relates wholly to pre-20 September 1985 eligible asset interests - the company is taken, for the purposes of this Part, to have acquired the eligible asset before 20 September 1985.

160ZZNA(6)   [Post-20/9/85 eligible asset]  

If an eligible asset relates wholly to post-20 September 1985 eligible asset interest - the eligible asset is taken, for the purposes of this section, to be a post-20 September 1985 eligible asset.

160ZZNA(7)   [Asset relating to pre- and post-20/9/85 eligible asset interests]  

If an eligible asset relates partly to both of the following:

(a) pre-20 September 1985 eligible asset interests;

(b) post-20 September 1985 eligible asset interests;

the following provisions have effect:

(c) the eligible asset is taken, for the purposes of this Part, to comprise 2 separate assets, as follows:

(i) the eligible asset to the extent to which it relates to pre-20 September 1985 eligible asset interests;

(ii) the eligible asset to the extent to which it relates to post-20 September 1985 eligible asset interests;

(d) the company is to be treated, for the purposes of this Part, as if the company had acquired the eligible asset referred to in subparagraph (c)(i) before 20 September 1985;

(e) the eligible asset referred to in subparagraph (c)(ii) is taken, for the purposes of this section, to be a post-20 September 1985 eligible asset;

(f) on the disposal of the actual eligible asset, the consideration in respect of the disposal of the actual eligible asset is to be apportioned between the separate assets.

160ZZNA(8)   [Consideration for post-20/9/85 eligible asset]  

The company is taken to have paid or given as consideration in respect of the acquisition of a post-20 September 1985 eligible asset:

(a) for the purposes of ascertaining whether a capital gain accrued to the company in the event of a subsequent disposal of the eligible asset by the company - the sum of the amounts that would have been the indexed cost bases to the ex-partners of post-20 September 1985 eligible asset interests for the purposes of this Part if this Part had applied in respect of the disposal of those interests to the company; or

(b) for the purposes of ascertaining whether the company incurred a capital loss in the event of a subsequent disposal of the eligible asset by the company - the sum of the amounts that would have been the reduced cost bases to the ex-partners of post-20 September 1985 eligible asset interests for the purposes of this Part if this Part had applied in respect of the disposal of those interests to the company.

160ZZNA(9)   [Post-20/9/85 eligible asset disposed of within 12 months]  

If a post-20 September 1985 eligible asset is disposed of by the company within 12 months after the earliest day, being a day after 19 September 1985, on which any post-20 September 1985 eligible asset interest was acquired by an ex-partner, the reference in paragraph (8)(a) to the indexed cost bases to the ex-partner of post-20 September 1985 eligible asset interests is a reference to the cost bases to the ex-partner of the post-20 September 1985 eligible asset interests.

160ZZNA(10)   [Replacement shares acquired by ex-partner]  

In the case of a particular taxpayer, being an ex-partner:

(a) if all of the interests in the eligible asset held by the taxpayer were pre-20 September 1985 eligible asset interests - the taxpayer is taken, for the purposes of this Part, to have acquired the replacement shares concerned before 20 September 1985; and

(b) if:

(i) some, but not all, of the interests in the eligible asset held by the taxpayer were pre-20 September 1985 eligible asset interests; and

(ii) the taxpayer, in the notice of election, nominates, as pre-CGT shares, such of the replacement shares acquired by the taxpayer as are specified in the notice; and

(iii) the number of replacement shares nominated by the taxpayer does not exceed the number calculated using the formula:

Shares

×

MV of pre-CGT interests   MV of total interests

where:

`` Shares '' means the number of replacement shares owned by the taxpayer immediately after the disposal.

`` MV of pre-CGT interests '' means the number of dollars in the market value of the pre-20 September 1985 eligible asset interests immediately before the disposal.

`` MV of total interests '' means the number of dollars in the market value of the interest in the eligible asset held by the taxpayer immediately before the disposal;

the taxpayer is taken, for the purposes of this Part, to have acquired the nominated shares before 20 September 1985; and

(c) each replacement share acquired by the taxpayer that is not taken by paragraph (a) or (b) to have been acquired by the taxpayer before 20 September 1985 is taken to be a post-20 September 1985 replacement share for the purposes of this section; and

(d) in the case of a post-20 September 1985 replacement share - the taxpayer is taken to have paid or given as consideration in respect of the acquisition of the share an amount equal to:

(i) for the purpose of ascertaining whether a capital gain accrued to the taxpayer in the event of a subsequent disposal of the share by the taxpayer - the amount calculated using the formula:

Net-ICB of post-CGT interests Post-CGT shares

where:

`` Net ICB of post-CGT interests '' means the sum of the amounts that would have been the indexed cost bases to the taxpayer of post-20 September 1985 eligible asset interests for the purposes of this Part if this Part had applied in respect of the disposal of the interests by the taxpayer to the company, being that sum reduced by the amount worked out in relation to the taxpayer using the reduction formula in subsection (10A);

`` Post-CGT shares '' means the number of post-20 September 1985 replacement shares owned by the taxpayer immediately after the disposal; or

(ii) for the purposes of ascertaining whether the taxpayer incurred a capital loss in the event of a subsequent disposal of the share by the taxpayer - the amount calculated using the formula:

Net-RCB of post-CGT interests Post-CGT shares

where:

`` Net RCB of post-CGT interests '' means the sum of the amounts that would have been the reduced cost bases to the taxpayer of post-20 September 1985 eligible asset interests for the purposes of this Part if this Part had applied in respect of the disposal of the interests by the taxpayer to the company, being that sum reduced by the amount worked out in relation to the taxpayer using the reduction formula in subsection (10A);

`` Post-CGT shares '' means the number of post-20 September 1985 replacement shares owned by the taxpayer immediately after the disposal.

160ZZNA(10A)   [Reduction formula]  

This is the reduction formula referred to in subparagraphs (10)(d)(i) and (ii):

Assumed liabilities

×

Ex-partner's interest

×

Post-20 September 1985         replacement shares             Replacement shares

where:

`` Assumed liabilities '' means the total amount of any liability or liabilities in respect of the eligible asset assumed by the company in connection with the disposal of the eligible asset.

`` Ex-partner's interest '' means the taxpayer's percentage interest in the eligible asset immediately before its disposal.

`` Post-20 September 1985 replacement shares '' means the number of post-20 September 1985 replacement shares acquired by the taxpayer.

`` Replacement shares '' means the total number of replacement shares acquired by the taxpayer.

160ZZNA(11)   [Post-20/9/85 replacement share disposed of within 12 months]  

If a post-20 September 1985 replacement share is disposed of by a taxpayer within 12 months after the earliest day, being a day after 19 September 1985, on which any partnership asset interest was acquired by the taxpayer, the reference in paragraph (10)(d) to the indexed cost bases to the taxpayer of interests is a reference to the cost bases to the taxpayer of the interests.

160ZZNA(12)   [Assumption of liability by company]  

The consideration in respect of the disposal mentioned in subsection (2) is not taken not to consist only of non-redeemable shares in the company merely because the company assumes in connection with the disposal a liability or liabilities in respect of the eligible asset but, if the company so assumes such a liability or liabilities, this section does not apply in relation to the disposal unless:

(a) in the case of a pre-20 September 1985 eligible asset interest - the amount of the liability or the total of the amounts of the liabilities does not exceed the market value of the interest at the time of the disposal; or

(b) in the case of a post-20 September 1985 eligible asset interest - the amount of the liability or the total of the amounts of the liabilities does not exceed the amount that, if this Part had applied in respect of the disposal of the interest by the ex-partner to the company, would have been:

(i) if the interest was disposed of within the period of 12 months after the day in which the interest was acquired by the ex-partner - the cost base to the ex-partner of the interest; or

(ii) if the interest was disposed of after that period - the indexed cost base to the ex-partner of the interest.

160ZZNA(13)   [Manner and time of election]  

An election under this subsection by a taxpayer, being an ex-partner, must be made by notice in writing given to the Commissioner on or before the date of lodgment of the return of income of the taxpayer for the year of income in which the disposal took place, or within such further period as the Commissioner allows.

160ZZNA(14)   [Reference to interest in the eligible asset]  

A reference in this section to an interest in the eligible asset that was acquired by an ex-partner at a particular time includes a reference to an interest in the eligible asset that was acquired by the ex-partner at a time when the eligible asset was a partnership asset of a partnership that was a predecessor (whether immediate or not) of the partnership mentioned in subsection (2).

160ZZNA(15)   [Amendment of assessments]  

Section 170 does not prevent the amendment of an assessment at any time for the purpose of giving effect to paragraph (2)(db).