Taxation Determination

TD 2004/51

Income tax: consolidation: capital gains: does section 124-784 of the Income Tax Assessment Act 1997 apply to determine the cost base of equity or debt issued by an acquiring entity to its ultimate holding company as part of a scrip for scrip arrangement if those companies are members of a consolidated group?

• Please note that the PDF version is the authorised version of this ruling.

FOI status:

1. No. The single entity rule in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997) applies to a consolidated group for income tax purposes. The single entity rule has the effect that equity and debt interests that arise between members of a consolidated group are not recognised for income tax purposes. Accordingly, section 124-784 of the ITAA 1997 cannot operate to set a cost base for intra-group equity or debt issued as part of a scrip for scrip arrangement.

2. Section 124-784 of the ITAA 1997 ordinarily allocates cost base to equity issued or new debt owed by an acquiring company to the ultimate head company of the group as part of an arrangement involving a downstream acquisition of another company if there is a common or significant stakeholder for the arrangement.

Date of effect

3. This Determination applies to years commencing both before and after its date of issue. However, it does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

Commissioner of Taxation
6 October 2004

Previously issued in draft form as TD 2004/D21

References

ATO references:
NO 2004/7335

Related Rulings/Determinations:

TR 92/20

Subject References:
capital gains
CGT exemptions
consolidation
consolidation - capital gains tax
head company
scrip for scrip rollover
single entity rule

Legislative References:
TAA 1953 Pt IVAAA
ITAA 1997 124-784
ITAA 1997 701-1