INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 17 - Miscellaneous roll-over relief  

SECTION 160ZZPH   CONVERSION OF INCORPORATED ASSOCIATION TO COMPANY INCORPORATED UNDER COMPANY LAW  

160ZZPH(1)   [Application of section]  

This section applies where:

(a) a company that is not incorporated under company law does any act or thing that results in the company becoming a company incorporated under company law at a particular time (in this section called the ``conversion time'' ) without the creation of a new legal entity; and

(b) immediately before the conversion time, each of 2 or more taxpayers (in this section called the ``converting taxpayers'' ) held a particular asset (in this section called the ``original asset'' ), being an interest of a member in, or in relation to, the company; and

(c) at or about the conversion time, the company issued shares (in this section called the ``new shares'' ) to each converting taxpayer; and

(d) the original assets held by each converting taxpayer were disposed of at or about the conversion time; and

(e) the consideration in respect of each of the disposals consists only of the new shares.

160ZZPH(1A)   [Demutualisation]  

This section does not apply if the company is a mutual entity that is being demutualised and to whose demutualisation Division 326 applies.

160ZZPH(2)   [Grant of CGT roll-over relief]  

If:

(a) either of the following conditions is satisfied in relation to a particular converting taxpayer:

(i) the taxpayer is a resident of Australia;

(ii) each disposal of an original asset by the taxpayer constitutes a disposal of a taxable Australian asset; and

(b) the taxpayer has elected that this subsection is to apply in respect of the disposal of all the original assets held by the taxpayer; and

(c) the Commissioner is satisfied, having regard to the following matters:

(i) the extent to which each converting taxpayer owned the new shares in the company in the same proportion as the taxpayer held the original assets in the company that were disposed of;

(ii) the extent (if any) to which the ratio worked out using the following formula:

Market value of taxpayer's original assets Market value of total original assets

where:

Market value of taxpayer's original assets is the market value, as at a particular time, of the original assets held by the taxpayer;

Market value of total original assets is the market value, as at that time, of all of the original assets in the company held by all converting taxpayers;

differs from the ratio worked out using the following formula:

Market value of taxpayer's new shares Market value of total new shares

where:

Market value of taxpayer's new shares is the market value, as at a particular time, of the new shares held by the taxpayer;

Market value of total new shares is the market value, as at that time, of all the new shares in the company held by all the converting taxpayers;

(iii) any other matters that the Commissioner considers relevant;

that it is appropriate to grant CGT roll-over relief in relation to the taxpayer in respect of the company becoming a company incorporated under company law;

the Commissioner must take such steps as are necessary to grant CGT roll-over relief in relation to the taxpayer in respect of the company becoming a company incorporated under company law.

160ZZPH(3)   [Determination by Commissioner]  

The steps that the Commissioner may take include:

(a) treating an original asset as if this Part did not apply in respect of its disposal; or

(b) if an original asset was acquired by the taxpayer before 20 September 1985 - treating a particular new share held by the taxpayer as having been acquired by the taxpayer before 20 September 1985; or

(c) if an original asset was acquired by the taxpayer on or after 20 September 1985 - treating the taxpayer as having paid, as consideration in respect of the acquisition of a particular new share held by the taxpayer, 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 new share by the taxpayer - such amount as is ascertained in a manner that the Commissioner determines to be appropriate; or

(ii) for the purpose of ascertaining whether the taxpayer incurred a capital loss in the event of the subsequent disposal of the new share by the taxpayer - such amount as is ascertained in a manner that the Commissioner determines to be appropriate.

160ZZPH(4)   [Determination of consideration]  

A determination under paragraph (3)(c) may provide for the amount concerned to be ascertained in a different manner in different circumstances.

160ZZPH(5)   [Form and period of election]  

An election for the purposes of subsection (2) is to be in writing and lodged with the Commissioner on or before the date of lodgment of the taxpayer's return of income of the later of the following years of income:

(a) the year of income in which the conversion time occurred;

(b) the year of income in which this section commenced;

or within such further period as the Commissioner allows.

160ZZPH(6)   [``company law'']  

In this section:

"company law"
means the Companies Act 1981 or a similar law of the Commonwealth, of a State, of a Territory or of a foreign country relating to companies.