Division 124—Replacement‑asset roll‑overs
Table of Subdivisions
Guide to Division 124
124‑A General rules
124‑B Asset compulsorily acquired, lost or destroyed
124‑C Statutory licences
124‑D Strata title conversion
124‑E Exchange of shares or units
124‑F Exchange of rights or options
124‑G Exchange of shares in one company for shares in another company
124‑H Exchange of units in a unit trust for shares in a company
124‑I Conversion of a body to an incorporated company
124‑J Crown leases
124‑K Depreciating assets
124‑L Prospecting and mining entitlements
124‑M Scrip for scrip roll‑over
124‑N Disposal of assets by a trust to a company
124‑O FSR (financial services reform) transitions
124‑1 What this Division is about
A replacement‑asset roll‑over allows you, in special cases, to defer the making of a capital gain or loss from one CGT event until a later CGT event happens. It involves your ownership of one CGT asset ending and you acquiring another one.
124‑5 How to find your way around this Division
(1) First, find out if you can obtain a roll‑over when your ownership of one or more CGT assets ends and you acquire one or more CGT assets: see Subdivisions 124‑B to 124‑O.
Note 1: If you carry on a small business, you may also be able to obtain a roll‑over under Subdivision 152‑E.
Note 2: Subdivision 124‑O (about FSR transitions) also provides for roll‑overs in situations where a replacement CGT asset is acquired by a new owner.
(2) Second, find out what the consequences are for being able to obtain a roll‑over: see Subdivision 124‑A.
Note: The consequences of a scrip for scrip roll‑over are set out in Subdivision 124‑M. The consequences of the new owner roll‑overs in Subdivision 124‑O (about FSR transitions) are set out in that Subdivision.
(3) Third, find out if there are any special rules relevant to your situation: see the Subdivision under which you can get the roll‑over.
Subdivision 124‑A—General rules
Table of sections
124‑10 Your ownership of one CGT asset ends
124‑15 Your ownership of more than one CGT asset ends
124‑10 Your ownership of one CGT asset ends
(1) There are these consequences (in most cases) if you can obtain a roll‑over when your ownership of a *CGT asset (the original asset) ends and you *acquire one or more CGT assets (the new assets) in a situation covered by this Division.
Example: Your commercial fishing licence expires and you get a new one.
(1A) A *car, motor cycle or similar vehicle must not be one of the new assets.
(2) A *capital gain or a *capital loss you make from the original asset is disregarded.
(3) If you *acquired the original asset on or after 20 September 1985, the first element of each new asset’s *cost base is:
The first element of each new asset’s *reduced cost base is worked out similarly.
Example: To continue the example, suppose the cost base of the fishing licence that expires is $5,000. This becomes the first element of the new one’s cost base.
Note 1: In some cases the amount you paid to acquire the new asset also forms part of the first element: see Subdivisions 124‑C (about statutory licences), Subdivision 124‑D (about strata title conversion) and Subdivision 124‑O (about FSR transitions).
Note 2: There are modifications to the consequences in Subdivision 124‑B (about compulsory acquisition, loss or destruction), Subdivision 124‑J (about Crown leases), Subdivision 124‑L (about prospecting and mining) and Subdivision 124‑O (about FSR transitions).
Note 3: No other elements of the cost base of the new asset are affected by the roll‑over.
Note 4: There are special indexation rules for roll‑overs: see Division 114.
Note 5: The reduced cost base may be modified for a roll‑over happening after a demerger: see section 125‑175.
(4) If you *acquired the original asset before 20 September 1985, you are taken to have acquired each new asset before that day.
Note: A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.
(5) However, subsection (4) is taken never to have applied to a *share to which subsection 104‑195(6) applies (CGT event J4).
124‑15 Your ownership of more than one CGT asset ends
(1) There are these consequences (in most cases) if you can obtain a roll‑over when your ownership of more than one *CGT asset (the original assets) ends and you acquire one or more CGT assets (the new assets) in a situation covered by this Division.
Example: You own 100 shares in a company. The company cancels these shares and issues you with 10 shares in return.
(1A) A *car, motor cycle or similar vehicle must not be one of the new assets.
(2) A *capital gain or a *capital loss you make from each original asset is disregarded.
(3) If you *acquired all the original assets on or after 20 September 1985, the first element of each new asset’s cost base is:
The first element of each new asset’s *reduced cost base is worked out similarly.
Note 1: No other elements of the cost base of the new asset are affected by the roll‑over.
Note 2: There are special indexation rules for roll‑overs: see Division 114.
(4) If you *acquired all the original assets before 20 September 1985, you are taken to have acquired each new asset before that day.
Note: A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.
(5) If you *acquired some of the original assets before 20 September 1985, you are taken to have acquired a number of new assets before that day. It is the maximum possible that does not exceed:
If the result is less than one, none of the new assets are taken to have been *acquired before 20 September 1985.
Example: To continue the example, suppose you acquired 67 of the 100 original shares before 20 September 1985. The number of new shares that you are taken to have acquired before that day cannot exceed:
So, you are taken to have acquired 6 of the 10 shares before that day.
Note: Subdivision 124‑O provides a different rule for FSR transitions.
(6) These rules are relevant to each remaining new asset. The first element of each one’s *cost base is:
The first element of each one’s *reduced cost base is worked out similarly.
Note: There are special indexation rules for roll‑overs: see Division 114.
Example: To continue the example, suppose the total of the cost bases of the 33 shares you acquired on or after 20 September 1985 is $400.
The first element of the cost base of each of the remaining 4 shares is:
The first element of the reduced cost base of those 4 shares is worked out similarly.
(7) However, subsections (4) and (5) are taken never to have applied to a *share to which subsection 104‑195(6) applies (CGT event J4).
Subdivision 124‑B—Asset compulsorily acquired, lost or destroyed
Table of sections
When a roll‑over is available
124‑70 Events giving rise to a roll‑over
124‑75 Other requirements if you receive money
124‑80 Other requirements if you receive an asset
The consequences of a roll‑over being available
124‑85 Consequences for receiving money
124‑90 Consequences for receiving an asset
124‑95 You receive both money and an asset
124‑70 Events giving rise to a roll‑over
(1) You may be able to choose a roll‑over if one of these events happens to a *CGT asset (the original asset) you own:
(a) it is compulsorily *acquired by an *Australian government agency;
(aa) it is compulsorily acquired by an entity (other than an Australian government agency or a *foreign government agency) under a power of compulsory acquisition conferred by a law covered under subsection (1A);
(b) it, or part of it, is lost or destroyed;
(c) you *dispose of it to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:
(i) the disposal takes place after a notice was served on you by or on behalf of the entity;
(ii) the notice invited you to negotiate with the entity with a view to the entity acquiring the asset by agreement;
(iii) the notice informed you that if the negotiations were unsuccessful, the asset would be compulsorily acquired by the entity;
(iv) the compulsory acquisition would have been under a power of compulsory acquisition conferred by a law covered under subsection (1A);
(ca) you dispose of it to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:
(i) the asset is land over which a mining lease was compulsorily granted;
(ii) the lease significantly affected your use of the land;
(iii) the lease was in force just before the disposal;
(iv) the entity to which you dispose of the land was the lessee under the lease;
(cb) you dispose of it to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:
(i) the asset is land over which a mining lease would have been compulsorily granted if you had not disposed of it;
(ii) that lease would have significantly affected your use of the land;
(iii) the entity to which you dispose of the land would have been the lessee under the lease.
(d) if it is a lease granted to you by an *Australian government agency under an *Australian law—the lease expires and is not renewed.
Note 1: There are no roll‑over consequences if you make a capital loss from the event.
Note 2: Section 103‑25 tells you when you have to make the choice.
(1A) A law is covered under this subsection if it is:
(a) an *Australian law (other than Chapter 6A of the Corporations Act 2001); or
(b) a *foreign law (other than a foreign law corresponding to Chapter 6A of the Corporations Act 2001).
(2) You must receive money or another *CGT asset (except a *car, motor cycle or similar vehicle), or both:
(a) as compensation for the event happening; or
(b) under an insurance policy against the risk of loss or destruction of the original asset.
Note: There are other requirements that must be satisfied if:
· you receive money: see section 124‑75; or
· you receive another CGT asset: see section 124‑80.
(3) The requirement in subsection (4) must be satisfied if:
(a) you are a foreign resident just before the event happens; or
(b) you are the trustee of a trust that is a *foreign trust for CGT purposes for the income year in which the event happens.
(4) The original asset must be *taxable Australian property just before the event happens. The other asset must be taxable Australian property just after you *acquire it.
124‑75 Other requirements if you receive money
(1) If you receive money for the event happening, you can choose to obtain a roll‑over only if these other requirements are satisfied.
Note: The roll‑over consequences are set out in section 124‑85.
(2) You must:
(a) incur expenditure in *acquiring another *CGT asset (except a *depreciating asset whose decline in value is worked out under Division 40 or deductions for which are calculated under Division 328); or
(b) if part of the original asset is lost or destroyed—incur expenditure of a capital nature in repairing or restoring it.
(3) At least some of the expenditure must be incurred:
(a) no earlier than one year, or within such further time as the Commissioner allows in special circumstances, before the event happens; or
(b) no later than one year, or within such further time as the Commissioner allows in special circumstances, after the end of the income year in which the event happens.
Special rules if you acquire another asset
(4) If just before the event happened the original asset:
(a) was used in your *business; or
(b) was *installed ready for use in your business; or
(c) was in the process of being *installed ready for use in your business;
the other asset must be used in the business, or be installed ready for use in the business, for a reasonable time after you *acquired it.
Otherwise, you must use the other asset (for a reasonable time after you *acquired it) for the same purpose as, or for a similar purpose to, the purpose for which you used the original asset just before the event happened.
(5) The other asset cannot become an item of your *trading stock just after you *acquire it, nor can it be a *depreciating asset whose decline in value is worked out under Division 40 or deductions for which are calculated under Division 328.
124‑80 Other requirements if you receive an asset
(1) If you receive another *CGT asset for the event happening, you can choose to obtain a roll‑over only if these other requirements are satisfied.
Note: The roll‑over consequences are set out in section 124‑90.
(2) The other asset cannot become an item of your *trading stock just after you *acquire it, nor can it be a *depreciating asset whose decline in value is worked out under Division 40 or deductions for which are calculated under Division 328.
(3) The *market value of the other asset (when you *acquire it) must be more than the *cost base of the original asset just before the event happens.
The consequences of a roll‑over being available
124‑85 Consequences for receiving money
(1) If you receive money for the event happening, there are these consequences if you choose to obtain a roll‑over.
Original asset acquired on or after 20 September 1985
(2) If you make a *capital gain from the event, this table sets out in what situations the gain is reduced, not reduced or disregarded.
It also sets out in what situations the expenditure you incurred to *acquire another *CGT asset or to repair or restore the original asset is reduced.
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You make a capital gain from the event |
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Item |
In this situation: |
There are these consequences |
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1 |
The money exceeds the expenditure you incurred to *acquire another CGT asset or to repair or restore the original asset |
If the gain is more than the excess: (a) the gain is reduced to the amount by which the money exceeds that expenditure; and (b) that expenditure is reduced by the amount by which the gain (before it is reduced) is more than the excess |
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2 |
The money exceeds that expenditure |
If the gain is less than or equal to the excess, the gain is not reduced |
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3 |
The money does not exceed that expenditure |
The gain is disregarded in working out your *net capital gain or *net capital loss for the income year. That expenditure is reduced by the amount of the gain |
Example: In 1999 Simon bought a small factory. In 2000 a fire destroys part of it. He receives $100,000 under an insurance policy.
The capital gain is worked out under section 112‑30.
Suppose the factory’s cost base at the time of the fire is $75,000 and the market value of the part that is not destroyed is $150,000. The cost base of the part that is destroyed is:
The capital gain is:
Case 1
Suppose Simon spent $80,000 on repairing the factory. The money he received under the insurance policy exceeds the repair cost by $20,000. The gain exceeds that by $50,000.
The result is that the gain is reduced to $20,000 and the $80,000 he spent on repairs is reduced to $30,000.
Case 2
Suppose Simon spent $15,000 on repairs instead. The money he received under the policy exceeds that amount by $85,000. This is more than the gain he made.
The gain is relevant to working out Simon’s net capital gain or loss for the income year and the $15,000 he spent on repairs forms part of the factory’s cost base.
Case 3
Suppose Simon spent $120,000 on repairs instead. The gain is disregarded and the $120,000 is reduced to $50,000.
Original asset acquired before 20 September 1985
(3) If you *acquired the original asset before 20 September 1985 and you incurred expenditure in acquiring another *CGT asset, you are taken to have acquired the other asset before that day if:
(a) the expenditure is not more than 120% of the *market value of the original asset when the event happened; or
(b) a natural disaster happened so that the original asset, or part of it, is lost or destroyed and it is reasonable to treat the other asset as substantially the same as the original asset.
(4) If you *acquired the original asset before 20 September 1985 and you incurred expenditure of a capital nature in repairing or restoring it, you are taken to have acquired the original asset (as repaired or restored) before that day.
124‑90 Consequences for receiving an asset
(1) If you receive another *CGT asset for the event happening, there are these consequences if you choose to obtain a roll‑over.
(2) A *capital gain you make from the original asset is disregarded.
(3) If you *acquired the original asset on or after 20 September 1985:
(a) the first element of the other asset’s *cost base is the original asset’s cost base at the time of the event; and
(b) the first element of the other asset’s *reduced cost base is the original asset’s reduced cost base at the time of the event.
Note: There are special indexation rules for roll‑overs: see Division 114.
Example: Steven bought land in 1999 for $100,000. In 2001 the government compulsorily acquires the land and gives him new land in return.
A capital gain he makes from the original land is disregarded. Suppose the original land’s cost base when it is acquired is $120,000. The first element of the new land’s cost base becomes $120,000.
(4) If you acquired the original asset before 20 September 1985, you are taken to have *acquired the other asset before that day.
124‑95 You receive both money and an asset
(1) If you receive both money and another *CGT asset for the event happening and choose to obtain a roll‑over, the requirements and consequences are different for each part of the compensation attributable to the original asset (having regard to the amount of money and the *market value of the other asset).
The other asset as a part of compensation
(2) The *market value of the other asset (when you *acquire it) must be more than that part of the *cost base of the original asset that is attributable to the new asset.
Note: This requirement is different to that in subsection 124‑80(3). It requires a proportional attribution of the cost base of the original asset.
(3) If you *acquired the original asset on or after 20 September 1985:
(a) the first element of the other asset’s *cost base is that part of the original asset’s cost base at the time of the event that is attributable to the new asset; and
(b) the first element of the other asset’s *reduced cost base is worked out similarly.
Note: These consequences are different to those in subsection 124‑90(3). They require a proportional attribution of the cost base of the original asset.
(4) If you *acquired the original asset before 20 September 1985, you are taken to have acquired the new asset before that day.
Money as a part of compensation
(5) If you make a *capital gain from the event, this table sets out in what situations that part of the gain on the original asset that is attributable to the amount of money you received is reduced, not reduced or disregarded.
It also sets out in what situations the expenditure you incurred to *acquire another *CGT asset or to repair or restore the original asset is reduced.
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You make a capital gain from the event |
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Item |
In this situation: |
There are these consequences |
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1 |
The money exceeds the expenditure you incurred to *acquire another CGT asset or to repair or restore the original asset |
If that part of the gain that is attributable to the amount of money is more than the excess: (a) that part of the gain is reduced to the amount by which the money exceeds that expenditure; and (b) that expenditure is reduced by the amount by which that part of the gain (before it is reduced) is more than the excess |
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2 |
The money exceeds that expenditure |
If that part of the gain that is attributable to the amount of money is less than or equal to the excess, the gain is not reduced |
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3 |
The money does not exceed that expenditure |
That part of the gain that is attributable to the amount of money is disregarded in working out your *net capital gain or *net capital loss for the income year. That expenditure is reduced by the amount of that part of the gain |
Note: These consequences are different to those in subsection 124‑85(2). They require a proportional attribution of capital gain on the original asset.
(6) If you *acquired the original asset before 20 September 1985 and you incurred expenditure in acquiring another *CGT asset, you are taken to have acquired the other asset before that day if:
(a) the expenditure you incurred in acquiring the other asset is not more than 120% of the *market value of that part of the original asset that is attributable to the other asset when the event happened; or
(b) a natural disaster happened so that the original asset, or part of it, is lost or destroyed and it is reasonable to treat the other asset as substantially the same as that part of the original asset that is attributable to the new asset.
Note 1: The consequences in paragraph (6)(a) are different to those in paragraph 124‑85(3)(a). They require a proportional attribution of the market value of the original asset.
Note 2: The consequences in paragraph (6)(b) are different to those in paragraph 124‑85(3)(b). They require a proportional attribution of the original asset.
Example: Kris owns land, which he acquired in 1998. It is compulsorily acquired, and Kris receives $80,000 in cash and replacement land with a market value of $80,000.
The cost base of the original land is $150,000.
Kris buys additional land for $80,000.
Subsection (2) is satisfied because the market value of the replacement land ($80,000) is more than the part of the cost base of the original land that is attributable to the replacement land:
Applying subsection (5), the other part of the gain is disregarded, and the first element of the cost base of the replacement land is the part of the cost base of the original land that is attributable to the replacement land:
Applying subsection (3), the money he received ($80,000) is the same as the expenditure he incurred to buy the additional land. Item 3 in the table applies. The part of the gain that is attributable to that money is disregarded:
The expenditure is reduced by $5,000.
Subdivision 124‑C—Statutory licences
124‑140 Renewal or extension of a statutory licence
(1) There is a roll‑over if:
(a) a *statutory licence (the original licence) you have expires or you surrender it; and
(b) you get a new licence by renewing or extending the original one (which is due mainly to you having the original one).
Note 1: The roll‑over consequences are set out in Subdivision 124‑A. The original asset is the original licence. The new asset is the licence you get by renewing or extending the original licence.
Note 2: If there has been a capital improvement to the statutory licence: see section 108‑75.
(2) The first element of the *cost base and *reduced cost base of the new licence includes any amount you paid to get it (which can include giving property: see section 103‑5).
Note: The rest of the first element is worked out under Subdivision 124‑A.
(3) A statutory licence is an authority, licence, permit or quota (except a lease or a *mining entitlement or *prospecting entitlement) granted by:
(a) an *Australian government agency under an *Australian law; or
(b) a *foreign government agency under a *foreign law.
Subdivision 124‑D—Strata title conversion
124‑190 Strata title conversion
(1) You can choose to obtain a roll‑over if:
(a) you own property that gives you a right to occupy a unit in a building; and
(b) the building’s owner subdivides it into *stratum units; and
(c) the owner transfers to you the stratum unit that corresponds to the unit you had the right to occupy just before the subdivision.
Note 1: The roll‑over consequences are set out in section 124‑10. The original asset is the property that gave you the right to occupy a unit in the building. The new asset is the stratum unit.
Note 2: Section 103‑25 tells you when you have to make the choice.
(2) The first element of the *cost base and *reduced cost base of the *stratum unit includes any amount you paid to get it (which can include giving property: see section 103‑5).
Note: The rest of the first element is worked out under Subdivision 124‑A.
(3) A stratum unit is a lot or unit (however described in an *Australian law or a *foreign law relating to strata title or similar title) and any accompanying common property.
Subdivision 124‑E—Exchange of shares or units
Table of sections
124‑240 Exchange of shares in the same company
124‑245 Exchange of units in the same unit trust
124‑240 Exchange of shares in the same company
You can choose to obtain a roll‑over if:
(a) you own *shares (the original shares) of a certain class in a company; and
(b) the company redeems or cancels all shares of that class; and
(c) the company issues you with new shares (and you receive nothing else) in substitution for the original shares; and
(d) the *market value of the new shares just after they were issued is at least equal to the market value of the original shares just before they were redeemed or cancelled; and
(e) the*paid‑up share capital of the company just after the new shares were issued is the same as just before the original shares were redeemed or cancelled; and
(f) one of these requirements is satisfied:
(i) you are an Australian resident at the time of the redemption or cancellation; or
(ii) if you are a foreign resident at that time—the original shares were *taxable Australian property just before that time and the new shares are taxable Australian property when they are issued.
Note 1: The roll‑over consequences are set out in Subdivision 124‑A. The original assets are the original shares. The new assets are the new shares.
Note 2: Section 103‑25 tells you when you have to make the choice.
124‑245 Exchange of units in the same unit trust
You can choose to obtain a roll‑over if:
(a) you own units (the original units) of a certain class in a unit trust; and
(b) the trustee redeems or cancels all units of that class; and
(c) the trustee issues you with new units (and you receive nothing else) in substitution for the original units; and
(d) the *market value of the new units just after they were issued is at least equal to the market value of the original units just before they were redeemed or cancelled; and
(e) one of these requirements is satisfied:
(i) you are an Australian resident at the time of the redemption or cancellation; or
(ii) if you are a foreign resident at that time—the original units were *taxable Australian property just before that time and the new units are taxable Australian property when they are issued.
Note: The roll‑over consequences are set out in Subdivision 124‑A. The original assets are the original units. The new assets are the new units.
Subdivision 124‑F—Exchange of rights or options
Table of sections
124‑295 Exchange of rights or option to acquire shares in a company
124‑300 Exchange of rights or option to acquire units in a unit trust
124‑295 Exchange of rights or option to acquire shares in a company
(1) You can choose to obtain a roll‑over if:
(a) you own rights (the original rights) to *acquire *shares in a company or to acquire an option to acquire *shares in a company; or
(b) you own an option (the original option) to acquire *shares in a company;
and these other requirements are satisfied.
Note: Section 103‑25 tells you when you have to make the choice.
(2) The *shares must:
(a) be consolidated and divided into new shares of a larger amount; or
(b) be subdivided into new shares of a smaller amount.
(3) The company must cancel the original rights or original option because of the consolidation or subdivision.
(4) The company must:
(a) issue you with new rights (relating to the new *shares) in substitution for the original rights; or
(b) issue you with a new option (relating to the new shares) in substitution for the original option.
(5) You must receive nothing else in substitution for the original rights or original option.
(6) The *market value of the new rights or new option just after it was issued must be at least equal to the market value of the original rights or original option just before it was cancelled.
(7) One of these requirements must be satisfied:
(a) you must be an Australian resident at the time of the cancellation; or
(b) if you are a foreign resident at that time:
(i) the original rights or original option were *taxable Australian property just before that time; and
(ii) the new rights or new option are taxable Australian property when they are issued.
Note: The roll‑over consequences are set out in Subdivision 124‑A. The original asset is the original rights or original option. The new asset is the new rights or new option.
124‑300 Exchange of rights or option to acquire units in a unit trust
(1) You can choose to obtain a roll‑over if:
(a) you own rights (the original rights) to *acquire units in a unit trust or to acquire an option to acquire units in a unit trust; or
(b) you own an option (the original option) to acquire units in a unit trust;
and these other requirements are satisfied.
Note: Section 103‑25 tells you when you have to make the choice.
(2) The units must:
(a) be consolidated and divided into new units of a larger amount; or
(b) be subdivided into new units of a smaller amount.
(3) The trustee must cancel the original rights or original option because of the consolidation or subdivision.
(4) The trustee must:
(a) issue you with new rights (relating to the new units) in substitution for the original rights; or
(b) issue you with a new option (relating to the new units) in substitution for the original option.
(5) You must receive nothing else in substitution for the original rights or original option.
(6) The *market value of the new rights or new option just after it was issued must be at least equal to the market value of the original rights or original option just before it was cancelled.
(7) One of these requirements must be satisfied:
(a) you must be an Australian resident at the time of the cancellation; or
(b) if you are a foreign resident at that time:
(i) the original rights or original option were *taxable Australian property just before that time; and
(ii) the new rights or new option are taxable Australian property when they are issued.
Note: The roll‑over consequences are set out in Subdivision 124‑A. The original asset is the original rights or original option. The new asset is the new rights or new option.
Subdivision 124‑G—Exchange of shares in one company for shares in another company
124‑350 What this Subdivision is about
This Subdivision sets out when you can obtain a roll‑over if:
you own shares in a company; and
there is a reorganisation of its affairs so that you become the owner of new shares in another company.
Table of sections
124‑355 Summary of rules
Disposal case
124‑360 Disposal of shares in one company for shares in another one
124‑365 Other requirements to be satisfied
Redemption or cancellation case
124‑370 Redemption or cancellation of shares in one company for shares in another one
124‑375 Other requirements to be satisfied
Rules applying to both cases
124‑380 Requirements to be satisfied in both cases
Consequences for the interposed company unless consolidated group continues
124‑385 Consequences for the interposed company
Additional consequences for member if shares are trading stock or revenue assets
124‑390 Deferral of profit or loss on shares
(1) This Subdivision deals with 2 cases in which you can choose to obtain a roll‑over because of the reorganisation of a company’s affairs.
Note: Section 103‑25 tells you when you have to make the choice.
(2) The first case is if you dispose of shares in one company to another company and the other company issues you with new shares. You can find the specific rules relevant to this case in sections 124‑360 and 124‑365.
(3) The second case is if your shares in one company are redeemed or cancelled and another company issues you with new shares in return. You can find the specific rules relevant to this case in sections 124‑370 and 124‑375.
(4) There are some rules that apply in both cases: see section 124‑380.
(5) There are also consequences for the other company if you can choose to obtain the roll‑over: see section 124‑385.
124‑360 Disposal of shares in one company for shares in another one
(1) You can choose to obtain a roll‑over if:
(a) you are a *member of a company (the original company); and
(b) you and at least one other entity (the exchanging members) own all the *shares in it; and
(c) under a *scheme for reorganising its affairs, the exchanging members *dispose of all their shares in it to another company (the interposed company) in exchange for shares in the interposed company (and nothing else);
and the requirements in sections 124‑365 and 124‑380 are satisfied.
Note: The roll‑over consequences are set out in Subdivision 124‑A. The original assets are your shares in the original company. The new assets are your new shares in the interposed company.
(2) You are taken to have chosen to obtain the roll‑over if:
(a) immediately before the time referred to in section 124‑365 as the completion time, the original company is the *head company of a *consolidated group; and
(b) immediately after the completion time, the interposed company is the head company of the group.
Note: The consolidated group continues in existence because of section 703‑70.
124‑365 Other requirements to be satisfied
(1) The interposed company must own all the *shares in the original company just after all the exchanging members have *disposed of their shares in the original company (the completion time).
(2) Just after the completion time, each exchanging member must own:
(a) a whole number of *shares in the interposed company; and
(b) a percentage of the *shares in the interposed company that were issued to all the exchanging members that is equal to the percentage of the shares in the original company (that were *disposed of to the interposed company) that the member owned.
(3) The ratio of:
• the *market value of each exchanging member’s *shares in the interposed company to the market value of the shares in the interposed company issued to all the exchanging members (worked out just after the completion time);
must equal the ratio of:
• the market value of that member’s shares in the original company that were *disposed of to the interposed company to the market value of all the shares in the original company that were disposed of to the interposed company (worked out just before the first disposal).
Example: There are 100 shares in A Pty Ltd (the original company), all having the same rights. B Pty Ltd (the interposed company) acquires all the shares in A by issuing each shareholder in A 10 shares in itself for each share they have in A. All shares in B have the same rights. Bill owned 15 shares in A and received 150 shares in B in exchange.
(4) Either:
(a) you are an Australian resident at the time you *disposed of your *shares in the original company; or
(b) if you are a foreign resident at that time:
(i) your shares in the original company were *taxable Australian property just before that time; and
(ii) your shares in the interposed company are taxable Australian property just after the completion time.
Redemption or cancellation case
124‑370 Redemption or cancellation of shares in one company for shares in another one
(1) You can choose to obtain a roll‑over if you are a *member of a company (the original company) and under a *scheme for reorganising its affairs:
(a) another company (the interposed company) *acquires no more than 5 *shares in the original company; and
(b) these are the first shares that the interposed company acquires in the original company; and
(c) you and at least one other entity (the exchanging members) own all the remaining shares in the original company; and
(d) the original company redeems or cancels those remaining shares; and
(e) each exchanging member receives shares (and nothing else) in the interposed company in return for their shares in the original company being redeemed or cancelled;
and the requirements in sections 124‑375 and 124‑380 are satisfied.
Note: The roll‑over consequences are set out in Subdivision 124‑A. The original assets are your shares in the original company. The new assets are your new shares in the interposed company.
(1A) You are taken to have chosen to obtain the roll‑over if:
(a) immediately before the time referred to in section 124‑375 as the completion time, the original company is the *head company of a *consolidated group; and
(b) immediately after the completion time, the interposed company is the head company of the group.
Note: The consolidated group continues in existence because of section 703‑70.
(2) The original company can issue other *shares in itself to the interposed company as part of the scheme.
Note: Some of the interposed company’s shares in the original company may be taken to be acquired before 20 September 1985: see section 124‑385.
124‑375 Other requirements to be satisfied
(1) The interposed company must own all the *shares in the original company just after all the exchanging members have had their shares in the original company redeemed or cancelled (the completion time).
(2) Just after the completion time, each exchanging member must own:
(a) a whole number of *shares in the interposed company; and
(b) a percentage of the *shares in the interposed company that were issued to all the exchanging members that is equal to the percentage of the shares in the original company (that were redeemed or cancelled) that the member owned.
(3) The ratio of:
• the *market value of each exchanging member’s *shares in the interposed company to the market value of the shares in the interposed company issued to all the exchanging members (worked out just after the completion time);
must equal the ratio of:
• the market value of that member’s shares in the original company that were redeemed or cancelled to the market value of all the shares in the original company that were redeemed or cancelled (worked out just before the first redemption or cancellation).
Example: There are 100 shares in X Pty Ltd (the original company), all having the same rights. X issues 2 shares to Y Pty Ltd (the interposed company) and cancels all other shares in itself. Y issues each shareholder in X 10 shares in itself for each share they had in X. All shares in Y have the same rights. Wil owned 10 shares in X and received 100 shares in Y in exchange.
(4) Either:
(a) you are an Australian resident at the time your *shares in the original company are redeemed or cancelled; or
(b) if you are a foreign resident at that time:
(i) your shares in the original company were *taxable Australian property just before that time; and
(ii) your shares in the interposed company are taxable Australian property just after the completion time.
124‑380 Requirements to be satisfied in both cases
(1) The *shares issued in the interposed company must not be *redeemable shares.
(2) Each exchanging member who is issued *shares in the interposed company must own the shares from the time they are issued to the completion time.
(3) Just after the completion time:
(a) the exchanging members must own all the *shares in the interposed company; or
(b) entities other than those members must own no more than 5 *shares in the interposed company and the *market value of those shares expressed as a percentage of the market value of all the shares in the interposed company is such that it is reasonable to treat the exchanging members as owning all the shares.
Choice to be made by interposed company
(5) If:
(a) immediately before the completion time, the original company is the *head company of a *consolidated group; and
(b) immediately after the completion time, the interposed company is the head company of a *consolidatable group consisting only of itself and the *members of the group immediately before the completion time;
the interposed company must choose that the consolidated group is to continue in existence at and after the completion time.
Note: Sections 703‑65 to 703‑80 deal with the effects of the choice for the consolidated group.
(6) If subsection (5) of this section does not apply, the interposed company must choose that section 124‑385 apply.
(7) In either case, the interposed company must make the choice within 28 days after the completion time, or within such further time as the Commissioner allows. The choice cannot be revoked.
Note: This is an exception to the general rule about choices in section 103‑25.
Consequences for the interposed company unless consolidated group continues
124‑385 Consequences for the interposed company
(1A) This section applies if the interposed company so chooses under subsection 124‑380(6).
(1) A whole number of the *shares that the interposed company owns in the original company (just after the completion time) are taken to have been *acquired before 20 September 1985 if any of the original company’s assets as at the completion time were acquired by it before that day.
Note: Generally, a capital gain or capital loss you make from a CGT asset that you acquired before 20 September 1985 can be disregarded: see Division 104.
(2) The number (worked out as at the completion time) is the greatest possible that (when expressed as a percentage of all the *shares) does not exceed:
• the *market value of the original company’s assets that it *acquired before 20 September 1985 less its liabilities (if any) in respect of those assets;
expressed as a percentage of:
• the market value of all the original company’s assets less all of its liabilities.
(3) The first element of the *cost base of the interposed company’s *shares in the original company that are not taken to have been *acquired before 20 September 1985 is:
• the total of the cost bases (as at the completion time) of the original company’s assets that it acquired on or after that day;
less:
• its liabilities (if any) in respect of those assets.
(4) The first element of the *reduced cost base of the interposed company’s *shares is worked out similarly.
(5) A liability of the original company that is not a liability in respect of a specific asset or assets of the company is taken to be a liability in respect of all the assets of the company.
Note: An example is a bank overdraft.
(6) If a liability is in respect of 2 or more assets, the proportion of the liability that is in respect of any one of those assets is equal to:
Additional consequences for member if shares are trading stock or revenue assets
124‑390 Deferral of profit or loss on shares
(1) There are additional consequences if:
(a) under subsection 124‑360(2), you are taken to obtain the roll‑over and, at the time immediately before you *dispose of your *shares in the original company, some or all of them are your *trading stock or *revenue assets; or
(b) under subsection 124‑370(1A), you are taken to obtain the roll‑over and, at the time immediately before the original company redeems or cancels your shares in it, some or all of them are your trading stock or revenue assets.
Trading stock
(2) The amount included in your assessable income because of the *disposal, redemption or cancellation of each of your *shares in the original company that is your *trading stock at that time is equal to:
(a) if the share has been your trading stock ever since the start of the income year in which that time occurs—the total of:
(i) its *value as trading stock at the start of the income year; and
(ii) the amount (if any) by which its cost has increased since the start of the income year; or
(b) otherwise—its cost at that time.
(3) For each of the *shares in the interposed company that you acquired in return for those of your shares in the original company that were your *trading stock at that time, you are taken to have paid:
Note: The amount worked out under the formula becomes the cost of each of those shares in the interposed company.
Revenue assets
(4) For each of your *shares in the original company that is a *revenue asset at that time, your assessable income includes the total of the amounts that (apart from this subsection) would be subtracted from the gross disposal proceeds in calculating any profit or loss on your disposing of, or ceasing to own, that share at that time.
(5) For each of the *shares in the interposed company that you acquired in return for those of your shares in the original company that were *revenue assets at that time, you are taken to have paid:
Subdivision 124‑H—Exchange of units in a unit trust for shares in a company
124‑435 What this Subdivision is about
This Subdivision sets out when you can obtain a roll‑over if:
you own units in a unit trust; and
there is a reorganisation of its affairs so that you become the owner of new shares in a company.
Table of sections
124‑440 Summary of rules
Disposal case
124‑445 Disposal of units in a unit trust for shares in a company
124‑450 Other requirements to be satisfied
Redemption or cancellation case
124‑455 Redemption or cancellation of units in a unit trust for shares in a company
124‑460 Other requirements to be satisfied
Rules applying to both cases
124‑465 Requirements to be satisfied in both cases
Consequences for the company
124‑470 Consequences for the company
(1) This Subdivision deals with 2 cases in which you can choose to obtain a roll‑over because of the reorganisation of a unit trust’s affairs.
Note: Section 103‑25 tells you when you have to make the choice.
(2) The first case is if you dispose of units in a unit trust to a company and the company issues you with shares. You can find the specific rules about this case in sections 124‑445 and 124‑450.
(3) The second case is if your units in a unit trust are redeemed or cancelled and a company issues you with shares. You can find the specific rules about this case in sections 124‑455 and 124‑460.
(4) There are some rules that apply in both cases: see section 124‑465.
(5) There are also consequences for the company if you can choose to obtain a roll‑over: see section 124‑470.
124‑445 Disposal of units in a unit trust for shares in a company
You can choose to obtain a roll‑over if:
(a) you are a member of a unit trust; and
(b) you and at least one other entity (the exchanging members) own all the units in it; and
(c) under a *scheme for reorganising its affairs, the exchanging members *dispose of their units in it to a company in exchange for *shares in the company (and nothing else);
and the requirements in sections 124‑450 and 124‑465 are satisfied.
Note: The roll‑over consequences are out in Subdivision 124‑A. The original assets are your units in the unit trust. The new assets are your new shares in the company.
124‑450 Other requirements to be satisfied
(1) The company must own all the units in the unit trust just after all the exchanging members have *disposed of their units in the unit trust (the completion time).
(2) Just after the completion time, each exchanging member must own:
(a) a whole number of *shares in the company; and
(b) a percentage of the *shares in the company that were issued to all the exchanging members that is equal to the percentage of the units in the unit trust (that were *disposed of to the company) that the member owned.
(3) The ratio of:
• the *market value of each exchanging member’s *shares in the company to the market value of the shares in the company issued to all the exchanging members (worked out just after the completion time);
must equal the ratio of:
• the market value of that member’s units in the unit trust that were disposed of to the company to the market value of all the units that were disposed of to the company (worked out just before the first disposal).
Example: There are 1,000 units in the A unit trust, all having the same rights. B Pty Ltd acquires all the units in A by issuing each unitholder in A 10 shares in itself for each 100 units they have in A. All shares in B have the same rights. Brian owned 300 units in A and received 30 shares in B in exchange.
(4) Either:
(a) you are an Australian resident at the time you *disposed of your units in the unit trust; or
(b) if you are a foreign resident at that time:
(i) your units were *taxable Australian property just before that time; and
(ii) your *shares in the company are taxable Australian property just after the completion time.
Redemption or cancellation case
124‑455 Redemption or cancellation of units in a unit trust for shares in a company
(1) You can choose to obtain a roll‑over if you are a member of a unit trust and under a *scheme for reorganising its affairs:
(a) a company *acquires no more than 5 units in the trust; and
(b) these are the first units that the company acquires in the trust; and
(c) you and at least one other entity (the exchanging members) own all the remaining units in the trust; and
(d) the trustee redeems or cancels those remaining units; and
(e) each exchanging member receives *shares (and nothing else) in the company in return for their units being redeemed or cancelled;
and the requirements in sections 124‑460 and 124‑465 are satisfied.
Note: The roll‑over consequences are set out in Subdivision 124‑A. The original assets are your units in the unit trust. The new assets are your new shares in the company.
(2) The trustee of the unit trust can issue other units to the company as part of the scheme.
Note: Some of the company’s units in the unit trust may be taken to be acquired before 20 September 1985: see section 124‑470.
124‑460 Other requirements to be satisfied
(1) The company must own all the units in the unit trust just after all the exchanging members have had their units in the unit trust redeemed or cancelled (the completion time).
(2) Just after the completion time, each exchanging member must own:
(a) a whole number of *shares in the company; and
(b) a percentage of the *shares in the company that were issued to all the exchanging members that is equal to the percentage of the units in the unit trust (that were redeemed or cancelled) that the member owned.
(3) The ratio of:
• the *market value of each exchanging member’s *shares in the company to the market value of the shares in the company issued to all the exchanging members (worked out just after the completion time);
must equal the ratio of:
• the market value of that member’s units in the unit trust that were redeemed or cancelled to the market value of all the units that were redeemed or cancelled (worked out just before the first redemption or cancellation).
Example: There are 1,000 units in the A unit trust, all having the same rights. 2 new units in A are issued to B Pty Ltd, and all other units in A are cancelled. Each unitholder in A is issued 10 shares in B for each 100 units they have in A. All shares in B have the same rights. Alison owned 200 units in A and received 20 shares in B in exchange.
(4) Either:
(a) you are an Australian resident at the time your units in the unit trust are redeemed or cancelled; or
(b) if you are a foreign resident at that time:
(i) your units were *taxable Australian property just before that time; and
(ii) your *shares in the company are taxable Australian property just after the completion time.
124‑465 Requirements to be satisfied in both cases
(1) The *shares issued in the company must not be *redeemable shares.
(2) Each exchanging member who is issued *shares in the company must own the shares from the time they are issued to the completion time.
(3) Just after the completion time:
(a) the exchanging members must own all the *shares in the company; or
(b) entities other than those members must own no more than 5 *shares in the company and the *market value of those shares expressed as a percentage of the market value of all the shares in the company is such that it is reasonable to treat the exchanging members as owning all the shares.
Choice to be made by company
(5) The company must choose that the rules in section 124‑470 apply. It must make its choice within 2 months after the completion time, or within such further time as the Commissioner allows.
Note: This is an exception to the general rule about choices in section 103‑25.
124‑470 Consequences for the company
(1) A whole number of the units that the company owns in the unit trust (just after the completion time) are taken to have been *acquired before 20 September 1985 if any of the unit trust’s assets as at the completion time were acquired by it before that day.
Note: Generally, a capital gain or capital loss you make from a CGT asset that you acquired before 20 September 1985 can be disregarded: see Division 104.
(2) The number (worked out as at the completion time) is the greatest possible that (when expressed as a percentage of all the units) does not exceed:
• the *market value of the unit trust’s assets that it *acquired before 20 September 1985 less its liabilities (if any) in respect of those assets;
expressed as a percentage of:
• the market value of all the unit trust’s assets less all of its liabilities.
(3) The first element of the *cost base of the company’s units in the unit trust that are not taken to have been *acquired before 20 September 1985 is:
• the total of the cost bases (as at the completion time) of the unit trust’s assets that it acquired on or after that day;
less:
• its liabilities (if any) in respect of those assets.
(4) The first element of the *reduced cost base of the company’s units is worked out similarly.
(5) A liability of the unit trust that is not a liability in respect of a specific asset or assets of the trust is taken to be a liability in respect of all the assets of the trust.
Note: An example is a bank overdraft.
(6) If a liability is in respect of 2 or more assets, the proportion of the liability that is in respect of any one of those assets is equal to:
Subdivision 124‑I—Conversion of a body to an incorporated company
124‑520 Conversion of a body to an incorporated company
(1) You can choose to obtain a roll‑over if:
(a) you are a member of a body that is incorporated under a law (other than the Corporations Act 2001 or a similar *foreign law relating to companies); and
(b) the body is converted into a company incorporated under the Corporations Act 2001 or a similar foreign law relating to companies (without creating a new legal entity); and
(c) the company issues you with *shares (and you receive nothing else) in substitution for your interest in the body just before the conversion; and
(d) there is no significant difference in:
(i) the ownership of the body just before the conversion and the ownership of the company just after the conversion; or
(ii) the mix of ownership of the body just before the conversion and the mix of ownership of the company just after the conversion; and
(e) this requirement is satisfied:
(i) you are an Australian resident at the time of the conversion; or
(ii) if you are a foreign resident at that time—your interest in the body was *taxable Australian property just before that time and the *shares are taxable Australian property when they are issued.
Note 1: The roll‑over consequences are set out in Subdivision 124‑A. The original asset is your interest in the body. The new asset is your shares in the company.
Note 2: Section 103‑25 tells you when you have to make the choice.
(2) This section does not apply if the body is a mutual entity that is being demutualised and to whose demutualisation Division 326 in Schedule 2H of the Income Tax Assessment Act 1936 applies.
Subdivision 124‑J—Crown leases
124‑570 What this Subdivision is about
This Subdivision sets out the situations in which the holder of a Crown lease over land obtains a replacement asset roll‑over when the lease is, among other things, renewed, extended or converted to an estate in fee simple.
Table of sections
Operative provisions
124‑575 Extension or renewal of Crown lease
124‑580 Meaning of Crown lease
124‑585 Original right differs in area from new right
124‑590 Part of original right excised
124‑595 Treating parts of new right as separate assets
124‑600 What is the roll‑over?
124‑605 Change of lessor
124‑575 Extension or renewal of Crown lease
(1) There is a roll‑over if:
(a) you hold one or more *CGT assets that are *Crown leases over land (the original right); and
(b) the original right expires or you surrender it; and
(c) you are granted one or more new Crown leases over land or one or more estates in fee simple in land, or both (the new right); and
(d) the new right relates to the same land as the original right.
Note 1: The roll‑over consequences are set out in Subdivision 124‑A. They might be modified: see section 124‑600.
Note 2: If there has been a capital improvement to the Crown lease: see section 108‑75.
(2) The new right must have been granted in one of these ways:
(a) by renewing or extending the term of the original right where the renewal or extension is mainly due to your having held the original right; or
(b) by changing the purpose for which the land to which the original right related can be used; or
(c) by converting the original right to a *Crown lease in perpetuity; or
(d) by converting the original right to an estate in fee simple; or
(e) by consolidating, or consolidating and dividing, the original right; or
(f) by subdividing the original right; or
(g) by excising or relinquishing a part of the land to which the original right related; or
(h) by expanding the area of that land.
124‑580 Meaning of Crown lease
A Crown lease is:
(a) a lease of land granted by the Crown under an *Australian law (other than the common law); or
(b) a similar lease granted under a *foreign law.
124‑585 Original right differs in area from new right
(1) Even if the new right relates to different land to that to which the original right related, this Subdivision applies as if it relates to the same land in these cases:
(a) the difference in area is not significant;
(b) the difference in *market value is not significant;
(c) the new right was granted to correct errors in or omissions from the original right;
(d) the new right relates to a significantly different area of land but you had made reasonable efforts to ensure that the area was the same;
(e) it is otherwise reasonable for this Subdivision to apply in that way.
(2) However, the rule in subsection (1) does not apply if section 124‑590 applies.
124‑590 Part of original right excised
(1) There is a partial roll‑over if you *acquired the original right on or after 20 September 1985 and:
(a) the land to which the new right relates is different in area to the land the subject of the original right because a part (the excised part) of the land to which the original right related was excised or you relinquished it; and
(b) you received a payment for the expiry or surrender of the original right.
The payment can include giving property: see section 103‑5.
Note: Section 124‑600 sets out the effect on your cost base.
(2) There is no roll‑over for the excised part. The *cost base of the excised part is so much of the *cost base of the relevant *Crown lease as is attributable to the excised part.
Its *reduced cost base is worked out similarly.
Note: You may make a capital gain or loss on the excised part because of CGT event C2.
124‑595 Treating parts of new right as separate assets
(1) Each part of a *Crown lease or an estate in fee simple that is part of the new right is taken to be a separate *CGT asset to the extent that it relates to:
(a) land to which a Crown lease (that was part of the original right) related where you *acquired the lease before 20 September 1985; and
(b) land to which a Crown lease (that was part of the original right) related where you acquired the lease on or after 20 September 1985; and
(c) other land.
(2) You are taken to have *acquired each asset that is a separate *CGT asset because of paragraph (1)(a) before 20 September 1985.
124‑600 What is the roll‑over?
(1) The roll‑over is mainly as specified in Subdivision 124‑A.
(2) However, you work out the *cost base and *reduced cost base of *CGT assets (that you are not taken to have *acquired before 20 September 1985) and that are part of the new right a bit differently where section 124‑590 or 124‑595 applies.
(3) The first element of your *cost base for each of those assets is:
where:
CB of post‑CGT original right is the sum of the *cost bases of the *Crown leases (that were part of the original right) and that you *acquired on or after 20 September 1985 (just before the original right expired or was surrendered) reduced, if there is an excised part, by so much of those cost bases as is attributable to the excised part.
market value of all new assets is the *market value of all *CGT assets (that you are not taken to have *acquired before 20 September 1985) that are part of the new right just after you acquired them.
market value of separate asset is the *market value of the particular asset just after you *acquired it.
(4) The first element of the *reduced cost base of each of those assets is worked out similarly.
(1) You treat a lease of land (whether or not it is a *Crown lease) granted to you (the fresh lease) as being a renewal of your original right if:
(a) after the grant of the original right, the land (the original land) to which it related became vested in an *Australian government agency (other than the one that granted the original right); and
(b) the second agency granted you the fresh lease over:
(i) the original land; or
(ii) the original land less an excised area; or
(iii) the original land and other land; and
(c) the fresh lease was granted under an *Australian law (other than the common law).
(2) You do this even if there is a period between the end of the original right and the grant of the fresh lease if you continued to occupy the original land during that period under a permission, licence or authority granted by the second agency.
Subdivision 124‑K—Depreciating assets
Table of sections
124‑655 Roll‑over for depreciating assets
124‑660 Right granted to associate
124‑655 Roll‑over for depreciating assets
There is a roll‑over for a *depreciating asset if:
(a) the asset is attached to land you hold under a *quasi‑ownership right granted by an *exempt Australian government agency or an *exempt foreign government agency; and
(b) you *hold the asset because of section 40‑40; and
(c) the quasi‑ownership right expires or is terminated or you surrender it; and
(d) you are granted a new quasi‑ownership right over the land or an estate in fee simple in the land; and
(e) there is no roll‑over for you under Subdivision 124‑J (about Crown leases) or Subdivision 124‑L (about prospecting and mining entitlements).
Note 1: The roll‑over consequences are set out in Subdivision 124‑A.
Note 2: This section provides a roll‑over for a depreciating asset in the limited circumstances where Subdivision 124‑J cannot because a quasi‑ownership right over land covers situations that a Crown lease does not (for example, an easement over land).
Note 3: If there has been a capital improvement to the quasi‑ownership right: see section 108‑75.
124‑660 Right granted to associate
If the *quasi‑ownership right or estate in fee simple is instead granted to an *associate or an *associated government entity of yours:
(a) your *reduced cost base of the *depreciating asset is reduced by the *adjustable value of the asset just before the original quasi‑ownership right expired or was surrendered or terminated; and
(b) there is no roll‑over.
Subdivision 124‑L—Prospecting and mining entitlements
124‑700 What this Subdivision is about
This Subdivision sets out the situations in which there is a roll‑over if a prospecting or mining entitlement expires or is surrendered and it is replaced by a new one.
Table of sections
Operative provisions
124‑705 Extension or renewal of prospecting or mining entitlement
124‑710 Meaning of prospecting entitlement and mining entitlement
124‑715 Original entitlement differs in area from new entitlement
124‑720 Part of original entitlement excised
124‑725 Treating parts of new entitlement as separate assets
124‑730 What is the roll‑over?
124‑705 Extension or renewal of prospecting or mining entitlement
(1) There is a roll‑over if:
(a) you hold one or more *CGT assets that are *prospecting entitlements or *mining entitlements (the original entitlement); and
(b) the original entitlement expires or you surrender it; and
(c) you are granted one or more new prospecting entitlements or mining entitlements (the new entitlement); and
(d) the new entitlement relates to the same land as the original entitlement.
Note 1: The roll‑over consequences are set out in Subdivision 124‑A. They might be modified: see section 124‑730.
Note 2: If there has been a capital improvement to the entitlement: see section 108‑75.
(2) The new entitlement must have been granted in one of these ways:
(a) by renewing or extending the term of the original entitlement where the renewal or extension is mainly due to your having held the original entitlement; or
(b) by consolidating, or consolidating and dividing, the original entitlement; or
(c) by subdividing the original entitlement; or
(d) by converting a *prospecting entitlement to a *mining entitlement, or a mining entitlement to a prospecting entitlement; or
(e) by excising or relinquishing a part of the land to which the original entitlement related; or
(f) by expanding the area of that land.
124‑710 Meaning of prospecting entitlement and mining entitlement
(1) A prospecting entitlement is:
(a) an authority, licence, permit or entitlement under an *Australian law or *foreign law to prospect or explore for minerals in an area; or
(b) a lease of land that allows the lessee to prospect or explore for minerals on the land; or
(c) an interest in a thing referred to in paragraph (a) or (b).
(2) A mining entitlement is:
(a) an authority, licence, permit or entitlement under an *Australian law or *foreign law to mine for *minerals in an area; or
(b) a lease of land that allows the lessee to mine for minerals on the land; or
(c) an interest in a thing referred to in paragraph (a) or (b).
124‑715 Original entitlement differs in area from new entitlement
(1) Even if the new entitlement relates to different land to that to which the original entitlement related, this Subdivision applies as if it relates to the same land in these cases:
(a) the difference in area is not significant;
(b) the difference in *market value is not significant;
(c) the new entitlement was granted to correct errors in or omissions from the original entitlement;
(d) it is otherwise reasonable for this Subdivision to apply in that way.
(2) However, the rule in subsection (1) does not apply if section 124‑720 applies.
124‑720 Part of original entitlement excised
(1) There is partial roll‑over if you *acquired the original entitlement on or after 20 September 1985 and:
(a) the land to which the new entitlement relates is different in area to the land the subject of the original entitlement because a part (the excised part) of the land to which the original entitlement related was excised or you relinquished it; and
(b) you received a payment for the expiry or surrender of the original entitlement.
The payment can include giving property: see section 103‑5.
Note: Section 124‑730 sets out the effect on your cost base.
(2) There is no roll‑over for the excised part. The *cost base of the excised part is so much of the *cost base of the original entitlement as is attributable to the excised part.
Its *reduced cost base is worked out similarly.
Note: You may make a capital gain or loss on the excised part because of CGT event C2.
124‑725 Treating parts of new entitlement as separate assets
(1) Each part of a *prospecting entitlement or *mining entitlement that is part of the new entitlement is taken to be a separate *CGT asset to the extent that it relates to:
(a) land to which a prospecting entitlement or mining entitlement (that was part of the original entitlement) related where you *acquired the entitlement before 20 September 1985; and
(b) land to which a prospecting entitlement or mining entitlement (that was part of the original entitlement) related where you acquired the entitlement on or after 20 September 1985; and
(c) other land.
(2) You are taken to have *acquired each asset that is a separate *CGT asset because of paragraph (1)(a) before 20 September 1985.
124‑730 What is the roll‑over?
(1) The roll‑over is mainly as specified in Subdivision 124‑A.
(2) However, you work out the *cost base and *reduced cost base of *CGT assets (that you are not taken to have *acquired before 20 September 1985) and that are part of the new entitlement a bit differently where section 124‑720 or 124‑725 applies.
(3) The first element of your *cost base for each of those assets is:
where:
CB of post‑CGT original entitlement is the sum of the *cost bases of the prospecting entitlements or mining entitlements (that were part of the original entitlement) and that you *acquired on or after 20 September 1985 (just before the original entitlement expired or was surrendered) reduced, if there is an excised part, by so much of those cost bases as is attributable to the excised part.
market value of all new assets is the *market value of all *CGT assets (that you are not taken to have *acquired before 20 September 1985) that are part of the new entitlement just after you acquired them.
market value of separate asset is the *market value of the particular asset just after you *acquired it.
(4) The first element of the *reduced cost base of each of those assets is worked out similarly.
Subdivision 124‑M—Scrip for scrip roll‑over
124‑775 What this Subdivision is about
This Subdivision allows you to choose a roll‑over where post‑CGT shares or trust interests you own are replaced with other shares or trust interests, for example, where there is a company takeover.
You can only choose the roll‑over if you would have made a capital gain from the exchange.
Table of sections
Operative provisions
124‑780 Replacement of shares
124‑781 Replacement of trust interests
124‑782 Transfer or allocation of cost base of shares acquired by acquiring entity etc.
124‑783 Meaning of significant stakeholder, common stakeholder, significant stake and common stake
124‑784 Cost base of equity or debt given by acquiring entity to ultimate holding company
124‑785 What is the roll‑over?
124‑790 Partial roll‑over
124‑795 Exceptions
124‑800 Interest received for pre‑CGT interest
124‑810 Certain companies and trusts not regarded as having 300 members or beneficiaries
(1) There is a roll‑over if:
(a) an entity (the original interest holder) exchanges:
(i) a *share (the entity’s original interest) in a company (the original entity) for a share (the holder’s replacement interest) in another company; or
(ii) an option, right or similar interest (also the holder’s original interest) issued by the original entity that gives the holder an entitlement to acquire a share in the original entity for a similar interest (also the holder’s replacement interest) in another company; and
(b) the exchange is in consequence of a single *arrangement that satisfies subsection (2); and
(c) the conditions in subsection (3) are satisfied; and
(d) if subsection (4) applies, the conditions in subsection (5) are satisfied.
Note 1: There are some exceptions: see section 124‑795.
Note 2: The original interest holder can obtain only a partial roll‑over if the capital proceeds for its original interest includes something other than its replacement interest: see section 124‑790.
Note 3: A trustee who gets a roll‑over under this Subdivision for an original interest consisting of shares issued as part of a demutualisation may be eligible for a further roll‑over under Subdivision 126‑E when a beneficiary becomes absolutely entitled to the replacement shares.
Example 1: You can get a roll‑over if you exchange your shares in one entity for shares in another entity or if you exchange options in one entity for options in another entity. You cannot get a roll‑over if you exchange options for shares.
Example 2: Examples of arrangements that could be involved include:
· a company takeover, whether or not it is regulated by the Corporations Act 2001, resulting in a company owning 80% or more of another company’s shares.
· a scheme of arrangement governed by the Corporations Act 2001 that involves a cancellation of some interests in an original entity resulting in another entity owning 80% or more of the interests in the original entity.
Conditions for arrangement
(2) The *arrangement must:
(a) result in:
(i) a company (the acquiring entity) that is not a member of a *wholly‑owned group becoming the owner of 80% or more of the *voting shares in the original entity; or
(ii) a company (also an acquiring entity) that is a member of such a group increasing the percentage of voting shares that it owns in the original entity, and that company or members of the group becoming the owner of 80% or more of those shares; and
(b) be one in which at least all owners of *voting shares in the original entity (except a company referred to in paragraph (a)) could participate; and
(c) be one in which participation was available on substantially the same terms for all of the owners of interests of a particular type in the original entity.
Note 1: The 80% or more requirement is satisfied if the acquiring entity ends up owning at least 80% of the voting shares in the original entity. This may include shares held before the arrangement started.
Note 2: Participation will be on substantially the same terms if, for example, matters such as those referred to in subsections 619(2) and (3) of the Corporations Act 2001 affect the capital proceeds that each participant can receive.
Conditions for roll‑over
(3) The conditions are:
(a) the original interest holder *acquired its original interest on or after 20 September 1985; and
(b) apart from the roll‑over, it would make a *capital gain from a *CGT event happening in relation to its original interest; and
(c) its replacement interest is in a company (the replacement entity) that is:
(i) the company referred to in subparagraph (2)(a)(i); or
(ii) in any other case—the *ultimate holding company of the *wholly‑owned group; and
(d) the original interest holder chooses to obtain the roll‑over or, if section 124‑782 applies to it for the arrangement, it and the replacement entity jointly choose to obtain the roll‑over; and
(e) if that section applies, the original interest holder informs the replacement entity in writing of the *cost base of its original interest worked out just before a CGT event happened in relation to it.
Note: If the original interest holder also exchanges a CGT asset that it acquired before 20 September 1985, the cost base of any interest received in exchange for it is worked out under section 124‑800.
Further roll‑over conditions in certain cases
(4) The conditions specified in subsection (5) must be satisfied if the original interest holder and an acquiring entity did not deal with each other at *arm’s length and:
(a) neither the original entity nor the replacement entity had at least 300 *members just before the *arrangement started; or
(b) the original interest holder, the original entity and an acquiring entity were all members of the same *linked group just before that time.
Note: There are some cases where a company will not be regarded as having 300 members: see section 124‑810.
(5) The conditions are:
(a) the *market value of the original interest holder’s *capital proceeds for the exchange is at least substantially the same as the market value of its original interest; and
(b) its replacement interest carries the same kind of rights and obligations as those attached to its original interest.
CUFS
(6) This section applies to the holder of a Chess Unit of Foreign Security as if the holder held the underlying interests that the unit represents.
Note: A Chess Unit of Foreign Security is an interest, traded on the Australian Stock Exchange, in a foreign share, unit or interest.
(7) A company is the ultimate holding company of a *wholly‑owned group if it is not a *100% subsidiary of another company in the group.
124‑781 Replacement of trust interests
(1) There is a roll‑over if:
(a) an entity (also the original interest holder) exchanges:
(i) a unit or other interest (also the holder’s original interest) in a trust (also the original entity) for a unit or other interest (also the holder’s replacement interest) in another trust (also the acquiring entity); or
(ii) an option, right or similar interest (also the holder’s original interest) issued by the original entity that gives the holder an entitlement to acquire a unit or other interest in the original entity for a similar interest (also the holder’s replacement interest) in another trust (also the acquiring entity); and
(b) entities have *fixed entitlements to all of the income and capital of the original entity and the acquiring entity; and
(c) the exchange is in consequence of an *arrangement that satisfies subsection (2); and
(d) the conditions in subsections (3) and (4) are satisfied.
Note 1: There are some exceptions: see section 124‑795.
Note 2: The original interest holder can obtain only a partial roll‑over if the capital proceeds for its original interest includes something other than its replacement interest: see section 124‑790.
Conditions for arrangement
(2) The *arrangement must:
(a) result in the acquiring entity owning 80% or more of the *trust voting interests in the original entity or, if there are none, 80% or more of the units or other interests in the original entity; and
(b) be one in which at least all owners of trust voting interests (or of units or other interests) in the original entity (except the acquiring entity) could participate; and
(c) be one in which participation was available on substantially the same terms for all of the owners of interests or units of a particular type in the original entity.
Conditions for roll‑over
(3) The conditions are:
(a) the original interest holder *acquired its original interest on or after 20 September 1985; and
(b) apart from the roll‑over, it would make a *capital gain from a *CGT event happening in relation to its original interest; and
(c) it chooses to obtain the roll‑over or, if section 124‑782 applies to it for the *arrangement, it and the trustee of the acquiring entity jointly choose to obtain the roll‑over; and
(d) if that section applies to it, it informs that trustee in writing of the *cost base of its original interest as at the time just before a CGT event happened in relation to it.
Note: If the original interest holder also exchanges a CGT asset that it acquired before 20 September 1985, the cost base of any interest received in exchange for it is worked out under section 124‑800.
Further roll‑over conditions in certain cases
(4) These conditions must be satisfied if the original interest holder and the trustee of the acquiring entity did not deal with each other at *arm’s length and neither the original entity nor the acquiring entity had at least 300 beneficiaries just before the *arrangement started:
(a) the *market value of the original interest holder’s *capital proceeds for the exchange is at least substantially the same as the market value of its original interest; and
(b) its replacement interest carries the same kind of rights and obligations as those attached to its original interest.
Note: There are some cases where a trust will not be regarded as having 300 beneficiaries: see section 124‑810.
CUFS
(5) This section applies to the holder of a Chess Unit of Foreign Security as if the holder held the underlying interests that the unit represents.
Note: A Chess Unit of Foreign Security is an interest, traded on the Australian Stock Exchange, in a foreign share, unit or interest.
Meaning of trust voting interest
(6) A trust voting interest in a trust is an interest in the trust that confers rights of the same or a similar kind as the rights conferred by a *voting share in a company.
124‑782 Transfer or allocation of cost base of shares acquired by acquiring entity etc.
Transfer of cost base
(1) The *cost base of an original interest *acquired by an acquiring entity under the *arrangement from an original interest holder becomes the first element of the cost base and *reduced cost base of the acquiring entity for the interest if:
(a) the original interest holder obtains a roll‑over; and
(b) the holder is a *significant stakeholder or a *common stakeholder for the arrangement.
Note 1: For other interests, for example, interests for which the roll‑over is not chosen, the cost base will be worked out under the ordinary cost base rules in Divisions 110 and 112.
Note 2: There is a special rule to determine the cost base of equity or debt given to an ultimate holding company by an acquiring entity under an arrangement: see section 124‑784.
Allocation of cost base in cancellation case
(2) The *cost base and *reduced cost base of any interests (the new interests) issued by the original entity to an acquiring entity under the *arrangement is worked out under subsection (3) if:
(a) original interests of an original interest holder are cancelled under the arrangement; and
(b) the holder obtains a roll‑over for the cancellation; and
(c) the holder is a *significant stakeholder or a *common stakeholder for the arrangement.
(3) The first element of the *cost base and *reduced cost base of the new interests of an acquiring entity is that part of the cost base of the cancelled interests as can be reasonably allocated to the new interests, having regard to:
(a) the nature of the *arrangement; and
(b) the number, type and relative *market values of the cancelled interests and the new interests; and
(c) any other relevant matters.
Example: Robert Co has 3 shareholders: Antill Co with 300 shares, Rachael Co 400 shares and Margaret Co 300 shares. The cost base of each share is $1 and market value is $2. Margaret Co is owned by two shareholders, John and Paul, who each have 50 shares. The market value of each share is $20.
Under an arrangement, Robert Co cancels the shares of Antill Co and Rachael Co. They receive 30 and 40 shares respectively in Margaret Co, which becomes the sole shareholder in Robert Co. The market value of Antill Co’s and Rachael Co’s shares in Margaret Co is equivalent to the market value of their cancelled shares in Robert Co.
Robert Co also issues 700 shares to Margaret Co, reflecting the $1,400 total market value of the shares issued by Margaret Co to Antill Co and Rachael Co. Before and after the arrangement, Margaret Co’s shares in Robert Co were worth $2 each.
It is necessary to reasonably allocate the cost bases of the cancelled shares (700 x $1) to the 700 shares issued by Robert Co to Margaret Co. In this case, an allocation of $1 per share would be reasonable.
Note: If no new shares are issued by Robert Co, the cost base of the original shares that Margaret Co holds would not be adjusted.
(4) The amount allocated to a new interest under subsection (3) must not be more than its *market value just after the arrangement was completed.
124‑783 Meaning of significant stakeholder, common stakeholder, significant stake and common stake
Significant stakeholder
(1) An original interest holder is a significant stakeholder for an *arrangement if it had:
(a) a *significant stake in the original entity just before the arrangement started; and
(b) a significant stake in the replacement entity just after the arrangement was completed.
(2) Also, if an original interest holder is an acquiring entity, any other original interest holder is a significant stakeholder for an *arrangement if it:
(a) had a *significant stake in the original entity just before the *arrangement started; and
(b) is an *associate of the replacement entity just after the arrangement was completed.
Common stakeholder
(3) An original interest holder is a common stakeholder for an *arrangement if it had:
(a) a *common stake in the original entity just before the arrangement started; and
(b) a common stake in the replacement entity just after the arrangement was completed.
(4) If an acquiring entity for an *arrangement is an original interest holder, each other original interest holder that has a replacement interest is a common stakeholder for the arrangement.
(5) No original interest holder is a common stakeholder for an *arrangement if either the original entity or the replacement entity had at least 300 *members (for a company) or 300 beneficiaries (for a trust) just before the arrangement started.
Significant stake
(6) An entity has a significant stake in a company at a time if the entity, or the entity and the entity’s *associates between them:
(a) have at that time *shares carrying 30% or more of the voting rights in the company; or
(b) have at that time the right to receive for their own benefit 30% or more of any *dividends that the company may pay; or
(c) have at that time the right to receive for their own benefit 30% or more of any distribution of capital of the company.
Note: The tests are applied to interests held directly by an entity and its associates.
Example: There are 4 shareholders in YZT Company: Sonja has 60%, Mario has 20%, Peter has 10% and Dave has 10%.
Sonja, Mario and Peter are associates. They each have a significant stake in YZT because, on an associate inclusive basis, they each have a 90% stake in YZT. Dave does not have a significant stake because his total stake, on an associate inclusive basis, is 10%.
(7) An entity has a significant stake in a trust at a time if the entity, or the entity and the entity’s *associates between them, had at that time the right to receive for their own benefit 30% or more of any distribution to beneficiaries of the trust of income or capital of the trust.
(8) No original interest holder has a significant stake in a company that has at least 300 *members or a trust that has at least 300 beneficiaries if it is reasonable for the company or the trustee of the trust to conclude that this is the case on the information available to it.
Note: There are some cases where a company or trust will not be regarded as having 300 members or beneficiaries: see section 124‑810.
Common stake
(9) If the original entity and the acquiring entity are companies, an entity, or 2 or more entities, have a common stake in the original entity just before the *arrangement started and in the acquiring entity just after the arrangement was completed if the entity or entities, and their *associates, between them:
(a) had 80% or more of:
(i) the voting rights in the original entity just before the arrangement started; and
(ii) the voting rights in the replacement entity just after the arrangement was completed; or
(b) had the right to receive for their own benefit 80% or more of:
(i) any *dividends that the original entity may pay just before the arrangement started; and
(ii) any dividends that the replacement entity may pay just after the arrangement was completed; or
(c) had the right to receive for their own benefit 80% or more of:
(i) any distribution of capital of the original entity just before the arrangement started; and
(ii) any distribution of capital of the replacement entity just after the arrangement was completed.
(10) If the original entity and the acquiring entity are trusts, an entity, or 2 or more entities, have a common stake in the original entity just before the *arrangement started and in the acquiring entity just after the arrangement was completed if the entity or entities, and their *associates, between them:
(a) had, just before the arrangement started, the right to receive for their own benefit 80% or more of any distribution to beneficiaries of the original entity of income or capital of the original entity; and
(b) had, just after the arrangement was completed, the right to receive for their own benefit 80% or more of any distribution to beneficiaries of the replacement entity of income or capital of that entity.
124‑784 Cost base of equity or debt given by acquiring entity to ultimate holding company
Purpose
(1) This section allocates an appropriate *cost base to equity issued, or new debt owed, by an acquiring entity under the *arrangement to the *ultimate holding company where the cost base of an original interest was transferred or allocated under section 124‑782 because the original interest holder is a *significant stakeholder or a *common stakeholder for the arrangement.
Allocation of cost base
(2) The first element of the *cost base of the equity or debt for the *ultimate holding company is that part of the cost base of the original interest transferred or allocated under section 124‑782 as:
(a) may be reasonably allocated to the equity or debt; and
(b) is not more than the *market value of the equity or debt just after the arrangement was completed.
No capital gain on debt repayment
(3) Any *capital gain of the *ultimate holding company from the repayment of new debt owed by an acquiring entity under the *arrangement is disregarded to the extent that it relates to the difference between the part of the *cost base transferred or allocated under section 124‑782 and the *market value of the debt just after the arrangement was completed.
Note: If the debt is assigned or exchanged, there may be a capital gain.
124‑785 What is the roll‑over?
(1) A *capital gain you make from your original interest is disregarded.
(2) You work out the first element of the *cost base of each *CGT asset you received as a result of the exchange by reasonably attributing to it the cost base (or the part of it) of your original interest for which it was exchanged and for which you obtained the roll‑over.
(3) In applying subsection (2), you reduce the *cost base of your original interest (just before you stop owning it) by so much of that cost base as is attributable to an ineligible part (see section 124‑790).
(4) The first element of the *reduced cost base is worked out similarly.
Example 1: Lyn exchanges 1 share with a cost base of $10 for another share. The cost base of the new share is $10.
Example 2: Glenn exchanges 2 shares with cost bases of $10 and $11 respectively for one new share. The cost base of the new share is $21.
Example 3: Wayne exchanges 1 share with a cost base of $9 for share A with a market value of $5 and share B with a market value of $10. The cost base of share A is $3 and the cost base of share B is $6.
(1) The original interest holder can obtain only a partial roll‑over if its *capital proceeds for its original interest includes something (the ineligible proceeds) other than its replacement interest. There is no roll‑over for that part (the ineligible part) of its original interest for which it received ineligible proceeds.
(2) The *cost base of the ineligible part is that part of the cost base of your original interest as is reasonably attributable to it.
Example: Ken owns 100 shares in Aim Ltd. Those shares have a cost base of $2.
Ken accepts an offer from LBZ Ltd to acquire those shares. The offer is 1 share in LBZ (market value $4) plus $1 for each Aim share.
Ken chooses the roll‑over to the extent that he can.
The cost base of the ineligible part is [$100 ´ $200] ¸ $500 = $40.
Ken makes a capital gain of $100 - $40 = $60.
(1) You cannot obtain the roll‑over if, just before you stop owning your original interest, you are a foreign resident unless, just after you *acquire your replacement interest, the replacement interest is *taxable Australian property.
(2) You cannot obtain the roll‑over if:
(a) any *capital gain you might make from your replacement interest would be disregarded (except because of a roll‑over); or
(b) you and the acquiring entity are members of the same *wholly‑owned group just before you stop owning your original interest and the acquiring entity is a foreign resident.
Example: An example of a capital gain or loss being disregarded as mentioned in paragraph (2)(a) is because the asset is trading stock.
Note: A roll‑over may be available under Subdivision 126‑B in the circumstances mentioned in paragraph (2)(b).
(3) You cannot obtain the roll‑over for the *CGT event happening in relation to the exchange of your original interest if you can choose a roll‑over under Division 122 or Subdivision 124‑G for that event.
Note: Division 122 deals with the disposal of assets to a wholly‑owned company, and Subdivision 124‑G deals with company reorganisation.
124‑800 Interest received for pre‑CGT interest
(1) If, in consequence of the *arrangement, you exchange an interest that you *acquired before 20 September 1985 for an interest in the replacement entity, the first element of the *cost base and *reduced cost base of the interest in the replacement entity is its *market value just after you acquired it.
(2) The *cost base and *reduced cost base of the interest in the replacement entity is reduced if all or part of a *capital gain from *CGT event K6 happening is disregarded because of subsection 104‑230(10). The amount of the reduction is the amount of the *capital gain you disregard under that subsection.
Note 1: The full list of CGT events is in section 104‑5.
Note 2: Subsection 104‑230(10) provides that a capital gain from CGT event K6 is disregarded to the extent that you could have chosen a roll‑over under this Subdivision if your original interest had been post‑CGT.
124‑810 Certain companies and trusts not regarded as having 300 members or beneficiaries
(1) For the purposes of this Subdivision, a company is treated as if it did not have at least 300 *members if subsection (3) or (5) applies to it.
(2) For the purposes of this Subdivision, a trust is treated as if it did not have at least 300 beneficiaries if subsection (4) or (5) applies to it.
Concentrated ownership
(3) This subsection applies to a company if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, *shares in the company:
(a) carrying fixed entitlements to:
(i) at least 75% of the company’s income; or
(ii) at least 75% of the company’s capital; or
(b) carrying at least 75% of the voting rights in the company.
(4) This subsection applies to a trust if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, units or other fixed interests in the trust:
(a) carrying *fixed entitlements to:
(i) at least 75% of the trust’s income; or
(ii) at least 75% of the trust’s capital; or
(b) if beneficiaries of the trust have a right to vote in respect of activities of the trust—carrying at least 75% of those voting rights.
Possible variation of rights etc.
(5) This subsection applies to a company or trust if, because of:
(a) any provision in the entity’s constituent document, or in any contract, agreement or instrument:
(i) authorising the variation or abrogation of rights attaching to any of the *shares, units or other fixed interests in the entity; or
(ii) relating to the conversion, cancellation, extinguishment or redemption of any of those interests; or
(b) any contract, *arrangement, option or instrument under which a person has power to acquire any of those interests; or
(c) any power, authority or discretion in a person in relation to the rights attaching to any of those shares, units or interests;
it is reasonable to conclude that the rights attaching to any of those interests are capable of being varied or abrogated in such a way (even if they are not in fact varied or abrogated in that way) that, directly or indirectly, subsection (3) or (4) would apply to the entity.
Single individual
(6) For the purposes of subsections (3) and (4), all of the following are taken to be a single individual:
(a) an individual, whether or not the individual holds *shares, units or other interests in the entity concerned;
(b) the individual’s *associates;
(c) for any shares, units or interests in respect of which other individuals are nominees of the individual or of the individual’s associates—those other individuals.
Subdivision 124‑N—Disposal of assets by a trust to a company
124‑850 What this Subdivision is about
Entities can choose to obtain a roll‑over if:
(a) a trust disposes of all of its assets to a company; and
(b) units and interests in the trust are replaced by shares in the company.
The roll‑over may also be available for 2 or more trusts disposing of all their assets to a single company.
Note: The effect of the roll‑over may be reversed if the trust does not cease to exist within 6 months: see section 104‑195.
Table of sections
Operative provisions
124‑855 What this Subdivision deals with
124‑860 Requirements for roll‑over
124‑865 Entities both choose the roll‑over
124‑870 Roll‑over for owner of units or interests in a trust
124‑875 Effect on the transferor and transferee
124‑855 What this Subdivision deals with
(1) A roll‑over may be available for a restructuring (a trust restructure) if:
(a) a trust, or 2 or more trusts, (the transferor) *dispose of all of their *CGT assets to a company limited by *shares (the transferee); and
(b) *CGT event E4 is capable of applying to all of the units and interests in the transferor; and
(c) the requirements in section 124‑860 are met.
Note: A roll‑over is not available for a restructure undertaken by a discretionary trust.
(2) For 2 or more transferors, units and interests in each transferor must be owned in the same proportions by the same beneficiaries.
Example: Matthew and Jaclyn each own 50% of the units in the Spring Unit Trust and the Dale Unit trust. All of the assets of both trusts are disposed of to Jonathon Pty Ltd. A roll‑over for a trust restructure is available if the other requirements of this Subdivision are met.
124‑860 Requirements for roll‑over
(1) All of the *CGT assets owned by the transferor must be disposed of to the transferee during the *trust restructuring period. However, ignore any CGT assets retained by the transferor to pay existing or expected debts of the transferor.
(2) The trust restructuring period for a trust restructure:
(a) starts just before the first *CGT asset is *disposed of to the transferee under the trust restructure, which must happen on or after 11 November 1999; and
(b) ends when the last CGT asset of the transferor is disposed of to the transferee.
(3) The transferee must not be an *exempt entity.
(4) The transferee must be a company that:
(a) has never carried on commercial activities; and
(b) has no *CGT assets other than small amounts of cash or debt; and
(c) has no losses of any kind.
Example: It could be a shelf company.
(5) Subsection (4) does not apply to a transferee that is the trustee of the transferor.
(6) Just after the end of the *trust restructuring period:
(a) each entity that owned interests in a transferor just before the start of the trust restructuring period must own replacement interests in the transferee in the same proportion as it owned those interests in that transferor; and
(b) the *market value of the replacement interests each of those entities owns in the transferee must be at least substantially the same as the market value of the interests it owned in the transferor or transferors just before the start of the trust restructuring period.
Note: Any assets in the company just before the start of the trust restructuring period may affect the ability of owners of units or interests to comply with paragraph (6)(b).
(7) For the purposes of subsection (6), ignore any *shares in the transferee that:
(a) just before the start of the *trust restructuring period, were owned by entities who together owned no more than 5 shares; and
(b) just after the end of that period, represented such a low percentage of the total *market value of all the shares that it is reasonable to treat other entities as if they owned all the shares in the transferee.
Example: To continue the example in subsection 124‑855(2), assume that Jonathon Pty Ltd was a shelf company organised for Matthew and Jaclyn by their solicitor, Indira.
Indira owned the 2 shares in Jonathon Pty Ltd before the trust restructuring period. The company issues Matthew and Jaclyn 5,000 shares each.
In these circumstances, it is reasonable to treat Matthew and Jaclyn as if they owned all the shares in Jonathon Pty Ltd.
124‑865 Entities both choose the roll‑over
A roll‑over is only available for the transferor and transferee if both the transferor and transferee choose to obtain it.
Note 1: If they do so, the consequences for the transferor and transferee are set out in section 124‑875.
Note 2: An entity that owns a unit or interest in the transferor can also choose to obtain a roll‑over: see section 124‑870.
124‑870 Roll‑over for owner of units or interests in a trust
(1) You can choose to obtain a roll‑over (whether or not the transferor and transferee choose to obtain a roll‑over, and even if *CGT event J4 applies) if:
(a) you own units or interests in the transferor (your original interests); and
(b) the ownership of all your units or interests ends under a trust restructure in exchange for *shares in the transferee (your replacement interests).
Note 1: The roll‑over consequences are set out in Subdivision 124‑A. The original assets are your units and interests in the transferor. The new assets are your shares in the transferee.
Note 2: The effect of the roll‑over may be reversed if the transferor does not cease to exist within 6 months: see section 104‑195.
(2) You must make the choice for each of your original interests.
(3) An entity that is a foreign resident cannot choose a roll‑over under this section unless the replacement interests the entity *acquires in the transferee are *taxable Australian property just after their acquisition.
(4) If you choose a roll‑over, you cannot make a *capital loss from a *CGT event that happens to your original interests during the *trust restructuring period.
Note: The rule in subsection (4) prevents a capital loss arising on your units or interests after the trust assets have been disposed of to the company but before your shares are issued to you.
Exception: trading stock
(5) This section does not apply to your ownership of an original interest ending if:
(a) the interest was an item of your *trading stock and the corresponding replacement interest becomes an item of your trading stock when you *acquire it; or
(b) the interest was not an item of your trading stock but the corresponding replacement interest becomes an item of your trading stock when you acquire it.
124‑875 Effect on the transferor and transferee
Capital gains and losses disregarded
(1) Any *capital gain or *capital loss from *CGT event A1 happening to the transferor under the trust restructure is disregarded (even if *CGT event J4 applies).
Note: The effect of the roll‑over may be reversed if the transferor does not cease to exist within 6 months: see section 104‑195.
Cost base is transferred
(2) The first element of the *cost base and *reduced cost base (for the transferee) of each *CGT asset that the transferee *acquires under the trust restructure is the same as the cost base and reduced cost base of that asset (for the transferor) just before that acquisition.
Note: For the cost base and reduced cost base of interests in the transferee: see Subdivision 124‑A.
Pre‑CGT assets retain their status
(3) If the transferor *acquired any of the *CGT assets *disposed of to the transferee under the trust restructure before 20 September 1985, the transferee is taken to have acquired it before that day.
(4) However, subsection (3) is taken never to have applied to such an asset of the transferee if subsection 104‑195(4) (CGT event J4) applies to the transferee in relation to the asset.
Exception: trading stock
(5) This section does not apply to a *CGT asset if:
(a) the asset was an item of *trading stock of the transferor and becomes an item of trading stock of the transferee; or
(b) the asset was not an item of trading stock of the transferor but becomes an item of trading stock of the transferee when the transferee *acquires it.
Exception: asset must be taxable Australian property for foreign resident transferee
(6) For a transferee that is a foreign resident, this section only applies to a *CGT asset that is *taxable Australian property just after the transferee *acquires it under the trust restructure.
Subdivision 124‑O—FSR (financial services reform) transitions
Table of sections
Same owner roll‑overs
124‑880 Old licence roll‑over (same owner)
124‑885 Qualified licence roll‑over (same owner)
124‑890 Rights roll‑over (same owner)
124‑895 Consequences of a same owner roll‑over
New owner roll‑overs
124‑900 Old licence roll‑over (new owner)
124‑905 Qualified licence roll‑over (new owner)
124‑910 Rights roll‑over (new owner)
124‑915 Consequences of a new owner roll‑over (where one CGT asset comes to an end)
124‑920 Consequences of a new owner roll‑over (where more than one CGT asset comes to an end)
Extension of FSR transition period
124‑925 Special extension of the 10 March 2004 cut‑off date (same owner roll‑overs)
124‑930 Special extension of the 10 March 2004 cut‑off date (new owner roll‑overs)
124‑880 Old licence roll‑over (same owner)
There is a roll‑over if:
(a) you apply for an *Australian financial services licence during the period beginning on 11 March 2002 and ending on 10 March 2004; and
(b) at the time you make the application, you hold one or more licences, registrations, approvals, authorities or other similar things (the old licence or licences) that give you the status of a regulated principal within the meaning of section 1430 of the Corporations Act 2001; and
(c) you are granted an Australian financial services licence as a result of the application; and
(d) that licence covers some or all of the activities that the old licence or licences authorised you to carry on; and
(e) the old licence or licences cease to have effect (whether wholly or partly):
(i) when the Australian financial services licence is granted to you; or
(ii) if the Australian financial services licence is granted to you after 10 March 2004—on 10 March 2004.
Note: The period in paragraph (a) may be extended in special circumstances: see section 124‑925. If it is extended, the day in subparagraph (e)(ii) changes too.
124‑885 Qualified licence roll‑over (same owner)
There is a roll‑over if:
(a) you apply for an *Australian financial services licence during the period beginning on 11 March 2002 and ending on 10 March 2004; and
(b) at the time you make the application, you hold an Australian financial services licence to which section 1434 of the Corporations Act 2001 applies (the qualified licence); and
(c) you are granted an Australian financial services licence as a result of the application (the new licence); and
(d) if the new licence is granted on or before 10 March 2004—the qualified licence is revoked as a result of the new licence being granted to you; and
(e) if the new licence is granted after 10 March 2004:
(i) the qualified licence ceases to have effect on 10 March 2004; and
(ii) if the new licence had been granted on or before 10 March 2004, the qualified licence would have been revoked as a result of the new licence being granted.
Note: The period in paragraph (a) may be extended in special circumstances: see section 124‑925. If it is extended, the day in paragraphs (d) and (e) changes too.
124‑890 Rights roll‑over (same owner)
There is a roll‑over if:
(a) one or more intangible *CGT assets owned by you cease to exist during the period beginning on 11 March 2002 and ending on 10 March 2004; and
(b) the asset or assets cease to exist because of the termination of one or more contracts; and
(c) the termination is directly connected with Chapter 7 of the Corporations Act 2001 (as amended by the Financial Services Reform Act 2001) beginning to apply to you; and
(d) you acquire one or more intangible CGT assets by entering into one or more contracts in substitution (whether wholly or partly) for the contract or contracts that were terminated.
Note: The period in paragraph (a) may be extended in special circumstances: see section 124‑925.
124‑895 Consequences of a same owner roll‑over
(1) In each situation covered by section 124‑880, 124‑885 or 124‑890, where:
(a) your ownership of one or more *CGT assets (the original asset or assets) comes to an end; and
(b) you acquire one or more CGT assets (the replacement asset or assets);
the consequences of that section applying are the consequences specified in Subdivision 124‑A, with the modifications set out below.
(2) The first element of the *cost base and *reduced cost base of each replacement asset includes any amount you paid to get the replacement asset (which can include giving property: see section 103‑5). This subsection does not apply if subsection (3) applies.
Note: If subsection (3) applies, any amount you paid to get the replacement asset is included in the cost base and reduced cost base by subsection (5).
(3) In a situation where subsection 124‑15(5) would otherwise apply (where you *acquired some original assets before 20 September 1985 and some on or after that date), use subsections (4) to (7) of this section instead of subsections 124‑15(5) and (6).
(4) Each replacement asset, or part of a replacement asset, to the extent that it relates to one or more original assets that were *acquired before 20 September 1985, is taken to be:
(a) a separate asset; and
(b) acquired before 20 September 1985.
(5) The first element of the *cost base of each replacement asset that you are not taken to have *acquired before 20 September 1985 is the sum of:
(a) the amount worked out under the formula in subsection (6); and
(b) either:
(i) any amount you paid to get the replacement asset (which can include giving property: see section 103‑5); or
(ii) for a replacement asset, part of which is treated as a separate asset under subsection (4)—such part of any amount you paid to get the asset (which can include giving property: see section 103‑5) as is reasonably attributable to the part of the asset that you are not taken to have acquired before 20 September 1985.
(6) The formula is:
Note: If an original asset is an old licence that ceases to have effect only partly, subsection (8) modifies this formula.
(7) The first element of each replacement asset’s *reduced cost base is worked out similarly.
(8) If, in a situation covered by section 124‑880, an old licence mentioned in that section ceases to have effect only partly, then:
(a) a reference in Subdivision 124‑A to the original asset’s *cost base; and
(b) the reference in subsection (6) of this section to the total of the *cost bases of the original assets;
is taken to be a reference to such part of the cost base of the old licence as is reasonably attributable to the part of the old licence that ceases to have effect.
124‑900 Old licence roll‑over (new owner)
(1) There is a roll‑over if:
(a) a person (the new owner) applies for an *Australian financial services licence during the period beginning on 11 March 2002 and ending on 10 March 2004; and
(b) at the time the application is made, another person (the original owner) holds one or more licences, registrations, approvals, authorities or other similar things (the old licence or licences) that give the original owner the status of a regulated principal within the meaning of section 1430 of the Corporations Act 2001; and
(c) the new owner is granted an Australian financial services licence as a result of the application; and
(d) if the Australian financial services licence is granted on or before 10 March 2004—the old licence or licences cease to have effect (whether wholly or partly) because, as a result of the Australian financial services licence being granted to the new owner, the original owner starts to be covered by an exemption under subsection 911A(2) of the Corporations Act 2001 (or would be so covered by an exemption if that subsection applied) in respect of the original owner’s regulated activities (within the meaning of section 1430 of the Corporations Act 2001); and
(e) if the Australian financial services licence is granted after 10 March 2004:
(i) the old licence or licences cease to have effect (whether wholly or partly) on 10 March 2004; and
(ii) if the Australian financial services licence had been granted before 10 March 2004, the old licence or licences would have ceased to have effect (whether wholly or partly) for the reason mentioned in paragraph (d); and
(f) subsection (2) or (3) applies.
Note: The period in paragraph (1)(a) may be extended in special circumstances: see section 124‑930. If it is extended, the day in paragraphs (d) and (e) changes too.
(2) This subsection applies if the new owner and the original owner are members of the same *consolidatable group at the time that the new owner *acquires the *Australian financial services licence.
(3) This subsection applies if:
(a) at the time that the new owner *acquires the *Australian financial services licence, all of the following apply:
(i) the new owner is a company or a trust;
(ii) if the new owner is a trust—*CGT event E4 is capable of applying to all of the units and interests in the trust;
(iii) all of the *membership interests in the new owner are owned by the original owner; and
(b) the original owner is an individual who, at the same time as, or just after, the new owner acquires the Australian financial services licence:
(i) becomes an authorised representative (within the meaning of section 761A of the Corporations Act 2001) of the new owner; or
(ii) becomes an employee of the new owner; or
(iii) becomes a director (within the meaning of the Corporations Act 2001) of the new owner.
124‑905 Qualified licence roll‑over (new owner)
(1) There is a roll‑over if:
(a) a person (the new owner) applies for an *Australian financial services licence during the period beginning on 11 March 2002 and ending on 10 March 2004; and
(b) at the time the application is made, another person (the original owner) holds an Australian financial services licence to which section 1434 of the Corporations Act 2001 applies (the qualified licence); and
(c) the new owner is granted an Australian financial services licence as a result of the application (the new licence); and
(d) if the new licence is granted on or before 10 March 2004—the qualified licence is revoked as a result of the new licence being granted to the new owner; and
(e) if the new licence is granted after 10 March 2004:
(i) the qualified licence ceases to have effect on 10 March 2004; and
(ii) if the new licence had been granted on or before 10 March 2004, the qualified licence would have been revoked as a result of the new licence being granted; and
(f) subsection (2) or (3) applies.
Note: The period in paragraph (1)(a) may be extended in special circumstances: see section 124‑930. If it is extended, the day in paragraphs (d) and (e) changes too.
(2) This subsection applies if the new owner and the original owner are members of the same *consolidatable group at the time that the new owner *acquires the new licence.
(3) This subsection applies if:
(a) at the time that the new owner *acquires the new licence, all of the following apply:
(i) the new owner is a company or a trust;
(ii) if the new owner is a trust—*CGT event E4 is capable of applying to all of the units and interests in the trust;
(iii) all of the *membership interests in the new owner are owned by the original owner; and
(b) the original owner is an individual who, at the same time as, or just after, the new owner acquires the new licence:
(i) becomes an authorised representative (within the meaning of section 761A of the Corporations Act 2001) of the new owner; or
(ii) becomes an employee of the new owner; or
(iii) becomes a director (within the meaning of the Corporations Act 2001) of the new owner.
124‑910 Rights roll‑over (new owner)
(1) There is a roll‑over if:
(a) one or more intangible *CGT assets owned by a person (the original owner) cease to exist during the period beginning on 11 March 2002 and ending on 10 March 2004; and
(b) the asset or assets cease to exist because of the termination of one or more contracts; and
(c) the termination is directly connected with the original owner choosing that another person (the new owner) will conduct, in place of the original owner, the business of the original owner in relation to which Chapter 7 of the Corporations Act 2001 (as amended by the Financial Services Reform Act 2001) is to apply; and
(d) the new owner acquires one or more intangible CGT assets by entering into one or more contracts in substitution (whether wholly or partly) for the contract or contracts that were terminated; and
(e) subsection (2) or (3) applies.
Note: The period in paragraph (1)(a) may be extended in special circumstances: see section 124‑930.
(2) This subsection applies if the new owner and the original owner are members of the same *consolidatable group at the time that the new owner *acquires the *CGT asset or assets mentioned in paragraph (1)(d).
(3) This subsection applies if:
(a) at the time that the new owner *acquires the *CGT asset or assets mentioned in paragraph (1)(d), all of the following apply:
(i) the new owner is a company or a trust;
(ii) if the new owner is a trust—*CGT event E4 is capable of applying to all of the units and interests in the trust;
(iii) all of the *membership interests in the new owner are owned by the original owner; and
(b) the original owner is an individual who, at the same time as, or just after, the new owner acquires the Australian financial services licence:
(i) becomes an authorised representative (within the meaning of section 761A of the Corporations Act 2001) of the new owner; or
(ii) becomes an employee of the new owner; or
(iii) becomes a director (within the meaning of the Corporations Act 2001) of the new owner.
124‑915 Consequences of a new owner roll‑over (where one CGT asset comes to an end)
(1) In each situation covered by section 124‑900, 124‑905 or 124‑910, where:
(a) a person’s (the original owner’s) ownership of one *CGT asset (the original asset) comes to an end; and
(b) another person (the new owner) acquires one or more *CGT assets (the replacement asset or assets);
the consequences of that section applying are the consequences specified in this section.
(2) A *capital gain or a *capital loss that the original owner makes from a *CGT event happening to the original asset is disregarded.
(3) If the original owner *acquired the original asset on or after 20 September 1985, the first element of each replacement asset’s *cost base is the sum of:
(a) the amount worked out under the formula in subsection (4); and
(b) any amount the new owner paid to get the replacement asset (which can include giving property: see section 103‑5).
(4) The formula is:
Note: If the original asset is an old licence that ceases to have effect only partly, subsection (7) modifies this formula.
(5) The first element of each replacement asset’s *reduced cost base is worked out similarly.
(6) If the original owner *acquired the original asset before 20 September 1985, the new owner is taken to have acquired each replacement asset before that day.
(7) If, in a situation covered by section 124‑900, an old licence mentioned in that section ceases to have effect only partly, then the reference in subsection (4) of this section to the original asset’s *cost base is taken to be a reference to such part of the cost base of the old licence as is reasonably attributable to the part of the old licence that ceases to have effect.
124‑920 Consequences of a new owner roll‑over (where more than one CGT asset comes to an end)
(1) In each situation covered by section 124‑900, 124‑905 or 124‑910, where:
(a) a person’s (the original owner’s) ownership of more than one *CGT asset (the original asset or assets) comes to an end; and
(b) another person (the new owner) acquires one or more *CGT assets (the replacement asset or assets);
the consequences of that section applying are the consequences set out in this section.
(2) A *capital gain or a *capital loss that the original owner makes from a *CGT event happening to any of the original assets is disregarded.
(3) If the original owner *acquired all the original assets on or after 20 September 1985, the first element of each replacement asset’s *cost base is the sum of:
(a) the amount worked out under the formula in subsection (4); and
(b) any amount the new owner paid to get the replacement asset (which can include giving property: see section 103‑5).
(4) The formula is:
Note: If an original asset is an old licence that ceases to have effect only partly, subsection (11) modifies this formula.
(5) The first element of each replacement asset’s *reduced cost base is worked out similarly.
(6) If the original owner *acquired all the original assets before 20 September 1985, the new owner is taken to have acquired each replacement asset before that day.
(7) If the original owner *acquired some of the original assets before 20 September 1985, each replacement asset, or part of a replacement asset, to the extent that it relates to one or more original assets that were *acquired before 20 September 1985, is taken to be:
(a) a separate asset; and
(b) acquired before 20 September 1985.
(8) If subsection (7) applies, the first element of the *cost base of each replacement asset that is not taken to have been *acquired before 20 September 1985 is the sum of:
(a) the amount worked out under the formula in subsection (9); and
(b) either:
(i) any amount the new owner paid to get the replacement asset (which can include giving property: see section 103‑5); or
(ii) for a replacement asset, part of which is treated as a separate asset under subsection (7)—such part of any amount the new owner paid to get the asset (which can include giving property: see section 103‑5) as is reasonably attributable to the part of the asset that is not taken to have been acquired before 20 September 1985.
(9) The formula is:
Note: If an original asset is an old licence that ceases to have effect only partly, subsection (11) modifies this formula.
(10) The first element of each replacement asset’s *reduced cost base is worked out similarly.
(11) If, in a situation covered by section 124‑900, an old licence mentioned in that section ceases to have effect only partly, then a reference in subsection (4) or (9) of this section to the original asset’s *cost base is taken to be a reference to such part of the cost base of the old licence as is reasonably attributable to the part of the old licence that ceases to have effect.
Extension of FSR transition period
124‑925 Special extension of the 10 March 2004 cut‑off date (same owner roll‑overs)
If the Australian Securities and Investments Commission makes a declaration that provides for the relevant old legislation (within the meaning of section 1430 of the Corporations Act 2001) to continue to apply to you until the end of the period declared by the Commission, then:
(a) the period mentioned in paragraphs 124‑880(a), 124‑885(a) and 124‑890(a) is modified in its application to you so that it ends on the last day of the period declared by the Commission; and
(b) subparagraph 124‑880(e)(ii) and paragraphs 124‑885(d) and (e) are modified in their application to you so that the day mentioned in those subparagraphs is the last day of the period declared by the Commission.
124‑930 Special extension of the 10 March 2004 cut‑off date (new owner roll‑overs)
If the Australian Securities and Investments Commission makes a declaration that provides for the relevant old legislation (within the meaning of section 1430 of the Corporations Act 2001) to continue to apply to a person who is an original owner mentioned in section 124‑900, 124‑905 or 124‑910 until the end of the period declared by the Commission, then:
(a) the period mentioned in paragraphs 124‑900(1)(a), 124‑905(1)(a) and 124‑910(1)(a) is modified in its application to that person so that it ends on the last day of the period declared by the Commission; and
(b) paragraphs 124‑900(1)(d) and (e) and 124‑905(1)(d) and (e) are modified in their application to that person so that the day mentioned in those subparagraphs is the last day of the period declared by the Commission.
Table of Subdivisions
Guide to Division 125
125‑A Object of this Division
125‑B Consequences for owners of interests
125‑C Consequences for members of demerger group
125‑D Corporate unit trusts and public trading trusts
125‑1 What this Division is about
Entities can obtain CGT relief for a demerger.
Owners of ownership interests in the head entity of a demerger group can obtain a roll‑over to defer CGT consequences for the CGT events that happen to their interests under the demerger (see Subdivision 125‑B).
Capital gains and capital losses made by members of the demerger group from certain CGT events that happen under the demerger are disregarded (see Subdivision 125‑C).
Note: Dividend relief is also available: see section 44 of the Income Tax Assessment Act 1936.
Subdivision 125‑A—Object of this Division
Table of sections
125‑5 Object of this Division
The object of this Division is to facilitate the demerging of entities by ensuring that capital gains tax considerations are not an impediment to restructuring a *business.
Subdivision 125‑B—Consequences for owners of interests
125‑50 Guide to Subdivision 125‑B
You can choose to obtain a roll‑over if a CGT event happens to your interests in a company or trust because of a demerger of an entity from the group of which the company or trust is the head entity.
There are cost base adjustments if you receive new interests under a demerger and no CGT event happens to your original interests.
Table of sections
Operative provisions
125‑55 When a roll‑over is available for a demerger
125‑60 Meaning of ownership interest and related terms
125‑65 Meanings of demerger group, head entity and demerger subsidiary
125‑70 Meanings of demerger, demerged entity and demerging entity
125‑75 Exception: employee share schemes
125‑80 What is the roll‑over?
125‑85 Cost base adjustments where CGT event happens but no roll‑over chosen
125‑90 Cost base adjustments where no CGT event
125‑95 No other cost base adjustment after demerger
125‑100 No further demerger relief in some cases
125‑55 When a roll‑over is available for a demerger
(1) You can choose to obtain a roll‑over if:
(a) you own an *ownership interest in a company or trust (your original interest); and
(b) the company or trust is the *head entity of a *demerger group; and
(c) a *demerger happens to the demerger group; and
(d) under the demerger, a *CGT event happens to your original interest and you *acquire a new or replacement interest (your new interest) in the *demerged entity.
Note 1: Section 125‑80 sets out what the roll‑over is.
Note 2: You have to make cost base adjustments even if there is no CGT event: see section 125‑90.
Example: Peter owns shares (his original interests) in Company A, a public company. Company B is a wholly owned subsidiary of Company A. Company A announces a demerger utilising a proportionate capital reduction and the disposal of all its shares in Company B to its 320,000 shareholders. Following the demerger all of the shareholders in Company A, including Peter, will own all of the shares in Company B (their new interests).
(2) You cannot choose to obtain a roll‑over under this Subdivision for an original interest if:
(a) you are a foreign resident; and
(b) the new interest you *acquire under the *demerger in exchange for that original interest is not *taxable Australian property just after you acquire it.
Note: For taxable Australian property, see section 855‑15.
125‑60 Meaning of ownership interest and related terms
(1) An ownership interest in a company or trust is:
(a) for a company, a *share in the company or an option, right or similar interest issued by the company that gives the owner an entitlement to *acquire a share in the company; and
(b) for a trust, a unit or other interest in the trust or an option, right or similar interest issued by the trustee that gives the owner an entitlement to acquire a unit or other interest in the trust.
(2) However, this Subdivision applies to a *dual listed company voting share in a company that is the *head entity of a *demerger group as if it were not an ownership interest if there are not more than 5 of those *shares in the company.
(3) A dual listed company voting share is a *share in a company:
(a) issued:
(ii) as part of a *dual listed company arrangement; and
(iii) mainly for the purpose of ensuring that shareholders of both companies involved in the arrangement vote as a single decision‑making body on matters affecting them; and
(b) that does not carry rights to financial entitlements (except the return of the amount paid up on the share and a dividend that is the equivalent of a dividend paid on an ordinary share).
(4) A dual listed company arrangement is an *arrangement under which 2 publicly listed companies, while maintaining their separate legal entity status, shareholdings and listings, align their strategic directions and the economic interests of their respective shareholders through:
(a) the appointment of common (or almost identical) boards of directors; and
(b) management of the operations of the 2 companies on a unified basis; and
(c) the shareholders of both companies voting in effect as a single decision‑making body on substantial issues affecting their combined interests; and
(d) equalised distributions to shareholders in accordance with an equalisation ratio applying between the 2 companies, both generally and in the event of a winding up of one or both of the companies; and
(e) cross‑guarantees as to, or similar financial support for, each other’s substantial obligations or operations, except where the effect of the relevant regulatory requirements prevents those guarantees or that financial support.
(5) However, an arrangement is not a dual listed company arrangement unless one but not both of the companies is an Australian resident.
125‑65 Meanings of demerger group, head entity and demerger subsidiary
(1) A demerger group comprises the *head entity of the group and one or more *demerger subsidiaries.
Note: An entity may be a member of one or more demerger groups.
(2) A trust cannot be a member of a demerger group unless *CGT event E4 is capable of applying to all of the units and interests in the trust.
Note: A discretionary trust cannot be a member of a demerger group.
(3) A company or trust is the head entity of a *demerger group if no other member of the group owns *ownership interests in the company or trust.
(4) If apart from this subsection, a company or trust would be the *head entity of a *demerger group and the company or trust, and all of its *demerger subsidiaries, are also demerger subsidiaries of another company or trust in another demerger group, the first‑mentioned company or trust is not the head entity of a demerger group.
(5) A company or trust (the first company or trust) that would, apart from this subsection, be a member of a demerger group is not a member of the demerger group if:
(a) the first company or trust owns, either alone or together with another company or trust that would, apart from this subsection, be a member of the *demerger group, more than 20% but less than 80% of the *ownership interests in a *listed public company or *listed widely held trust; and
(b) the listed public company or listed widely held trust chooses that the first company or trust not be a member of the demerger group.
(6) A company is a demerger subsidiary of another company or a trust that is a member of a *demerger group if the other company or the trust, either alone or together with other members of the group, owns, or has the right to *acquire, *ownership interests in the company that carry between them:
(a) the right to receive more than 20% of any distribution of income or capital by the company; or
(b) the right to exercise, or control the exercise of, more than 20% of the voting power of the company.
(7) A trust is a demerger subsidiary of another trust or a company that is a member of a *demerger group if the other trust or the company, either alone or together with other members of the group, owns, or has the right to *acquire, *ownership interests in the trust that carry between them the right to receive more than 20% of any distribution of income or capital by the trustee.
125‑70 Meanings of demerger, demerged entity and demerging entity
(1) A demerger happens to a *demerger group if:
(a) there is a restructuring of the demerger group; and
(b) under the restructuring:
(i) members of the demerger group *dispose of at least 80% of their total *ownership interests in another member of the demerger group to owners of original interests in the *head entity of the demerger group; or
(ii) at least 80% of the total ownership interests of members of the demerger group in another member of the demerger group end and new interests are issued to owners of original interests in the head entity; or
(iii) the demerged entity issues sufficient new ownership interests in itself with the result that owners of original interests in the head entity own at least 80% of the total ownership interests in the demerged entity; or
(iv) some combination of the processes referred to in subparagraphs (i), (ii) and (iii) happens with the effect that members of the demerger group stop owning at least 80% of the total ownership interests owned by members of the demerger group in another member of the group; and
Note: CGT event C2 and CGT event C3 are the only relevant CGT events in a subparagraph (ii) case.
(c) under the restructuring:
(i) a *CGT event happens to an original interest owned by an entity in the head entity of the group and the entity *acquires a new interest and nothing else; or
(ii) no CGT event happens to an original interest owned by an entity in the head entity of the group and the entity acquires a new interest and nothing else; and
(d) the acquisition by entities of new interests happens only because those entities own or owned original interests; and
(e) the new interests acquired are:
(i) if the head entity is a company—ownership interests in a company; or
(ii) if the head entity is a trust—ownership interests in a trust; and
(g) neither the original interests nor the new interests are in a trust that is a *superannuation fund; and
(h) the requirements of subsection (2) are met.
Example: To continue the example from subsection 125‑55(1), Peter owns 400 post‑CGT shares in Company A. Companies A and B are both members of a demerger group. Company A is the head entity of the demerger group and Company B is a demerger subsidiary.
Company A proceeds to demerge 100% of its shares in Company B to its shareholders.
Company A enters into a proportionate capital reduction, returning 40 cents per share to its ordinary shareholders. Peter is entitled to $160 (40c times 400 shares) under the capital reduction.
For Peter, the capital reduction amount of $160 is compulsorily applied to acquire Company A’s shares in Company B, at $6.75 (a discount of 10% to current market value). Company A rounds up the fractional amounts in calculating the number of whole shares to be distributed to each shareholder. This gives Peter 24 shares in Company B (160 divided by 6.75, rounded up to the nearest whole number).
Note: Acquiring new interests by an owner of original interests may include the allocation of the owner’s entitlement to new interests to a nominee:
· to sell on the owner’s behalf; or
· to hold pending the owner being located.
(2) Each owner (an original owner) of original interests in the *head entity of the *demerger group must:
(a) *acquire, under the *demerger, the same proportion, or as nearly as practicable the same proportion, of new interests in the *demerged entity as the original owner owned in the head entity just before the demerger; and
(b) just after the demerger, have the same proportionate total *market value of *ownership interests in the head entity and demerged entity as the original owner owned in the head entity just before the demerger.
Note 1: There is an exception: see section 125‑75.
Note 2: Dual listed company voting shares are not treated as ownership interests: see section 125‑60.
Note 3: Fractional interests will generally not affect your ability to choose a roll‑over.
Example: To continue the example from subsection (1), Company A concludes, given the circumstances of the demerger, that the market values of Peter’s and the other shareholders’ shares in A and B are expected to be in proportion with their original interests in Company A, and advises the shareholders of this position.
(3) In working out whether an original owner complies with subsection (2):
(a) disregard *ownership interests that are original interests the owner owns in the *demerged entity; and
(b) an anticipated reasonable approximation of the *market value of ownership interests is sufficient.
Example: An anticipated reasonable approximation of market values of ownership interests may include:
· valuations provided to shareholders in scheme documents;
· the price selected for use under a sale facility;
and may be made by reference to long‑term value.
Exception: off‑market buy‑backs
(4) A buy‑back of *shares that is an off‑market purchase for the purposes of Division 16K of Part III of the Income Tax Assessment Act 1936 is not a *demerger.
Exception: roll‑over available under another provision
(5) Circumstances where an owner of original interests can obtain a roll‑over under a provision of this Act outside this Division for all of the CGT events that happened to the owner’s original interests under the circumstances cannot be a demerger.
Note: An owner might be able to obtain a roll‑over for the CGT events under Subdivision 124‑E, 124‑G, 124‑H or 124‑M.
Meaning of demerged entity
(6) An entity that is a former member of a *demerger group is a demerged entity if, under a *demerger that happens to the group, *ownership interests in the entity are acquired by:
(a) shareholders in the *head entity of the group; or
(b) unitholders or holders of interests in the head entity of the group.
Meaning of demerging entity
(7) An entity that is a member of a *demerger group just before the *CGT event referred to in section 125‑155 happens is a demerging entity if, under a *demerger that happens to the group:
(a) the entity (either alone or together with other members of the demerger group)*dispose of at least 80% of their total *ownership interests in another member of the demerger group to owners of original interests in the *head entity of the demerger group; or
(b) at least 80% of the total ownership interests of that entity and of other members of the demerger group in another member of the demerger group end and new interests are issued to owners of original interests in the head entity; or
Note: CGT event C2 and CGT event C3 are the only relevant CGT events.
(c) the demerged entity issues sufficient new ownership interests in itself with the result that owners of original interests in the head entity own at least 80% of the total ownership interests in the demerged entity; or
(d) some combination of the processes referred to in paragraphs (a), (b) and (c) happens with the effect that members of the demerger group stop owning at least 80% of the total ownership interests owned by members of the demerger group in another member of the group.
125‑75 Exceptions to subsection 125‑70(2)
Employee share schemes
(1) In working out whether the requirements in subsection 125‑70(2) are met, disregard each of the *ownership interests described in subsections (2) and (3) if, just before the *demerger, those interests (taking into account either or both of their number and value) represented not more than 3% of the total *ownership interests in the entity.
(2) An *ownership interest in a company that is owned by an entity is disregarded under subsection (1) if the ownership interest:
(a) is:
(i) a *qualifying share or a *qualifying right *acquired under an *employee share scheme; or
(ii) a *share acquired under a *scheme to which section 26AAC of the Income Tax Assessment Act 1936 applies; and
(b) is not a fully‑paid ordinary share.
(3) An *ownership interest in a trust that is owned by an entity is disregarded under subsection (1) if the ownership interest:
(a) would be a *qualifying share or a *qualifying right *acquired under an *employee share scheme if Division 13A of Part III of the Income Tax Assessment Act 1936 applied to ownership interests in a trust; and
(b) is not a fully‑paid unit.
Adjusting instruments
(4) In working out whether the requirements in subsection 125‑70(2) are met, disregard each of the *ownership interests described in subsection (5) (adjusting instruments) if, just before the *demerger, those interests represented not more than 10%, or such greater percentage (not exceeding 17%) as is prescribed, of the ownership interests in the entity.
(5) An *ownership interest in a *listed public company or a *listed widely held trust that is the *head entity of a *demerger group is disregarded under subsection (4) if:
(a) the adjusting instrument was issued on terms that ensure that its value is not adversely affected by an *arrangement undertaken by the company or trust in relation to other ownership interests in the company or trust; and
(b) if the adjusting instrument can be converted into an ordinary *share in the company or an ordinary unit in the trust, any conversion will occur on a basis:
(i) that is set out in the terms of the issue of the instrument; and
(ii) that is adjusted to take into account a capital reduction or a capital reconstruction; and
(c) before conversion, the owner of the adjusting instrument does not have a right to participate in distributions of profit or capital except as set out in the terms of the issue of the instrument; and
(d) the adjusting instrument deals with the effect of a *demerger that happens to the demerger group on the value of the instrument.
Example: Some examples of adjusting instruments are:
· convertible preference shares, including reset preference shares;
· convertible notes;
· partly paid shares where the paid‑up amount is adjusted to reflect a capital reduction.
Additional exceptions
(6) The regulations may provide that, in working out whether the requirements in subsection 125‑70(2) are met, other *ownership interests of a kind specified in the regulations are to be disregarded if, just before the *demerger, those interests represented not more than a prescribed percentage of the ownership interests in the entity.
(7) However, the total percentage of *ownership interests to be disregarded under this section must not exceed 20% of the ownership interests in the entity.
(1) If you choose the roll‑over, a *capital gain or *capital loss you make from a *CGT event happening under the *demerger to an original interest you own is disregarded.
(2) If you choose the roll‑over, the first element of the *cost base and *reduced cost base of:
(a) each new interest that you are not taken to have *acquired before 20 September 1985; and
(b) if not all of your original interests ended under the *demerger—each of your remaining original interests that you acquired on or after 20 September 1985;
is such proportion of the sum of the cost bases of all your original interests that you acquired on or after 20 September 1985 (worked out just before the demerger) as is reasonable having regard to the matters specified in subsection (3).
Note 1: These rules replace the cost base and reduced cost base adjustments in CGT event E4 and CGT event G1.
Note 2: The head entity or the demerging entity may advise you of the proportions.
(3) The matters are:
(a) the *market values of your remaining original interests just after the *demerger, or an anticipated reasonable approximation of those market values; and
(b) the market values of your new
interests just after the demerger, or an anticipated
reasonable
approximation of those market values.
Example: To continue the example from subsection 125‑70(2), Company A advises its shareholders that Company B at that time represents 5% of the market value of the group as a whole. Peter’s cost base for each of his shares in A is $4.60, and Peter recalculates his cost base as follows:
to be spread over 400 shares in A and 24 shares in B.
Pre‑CGT interests
(4) The following subsections apply if you choose the roll‑over and you *acquired some or all of your original interests before 20 September 1985.
(5) If you *acquired all of your original interests before 20 September 1985, you are taken to have acquired all of your new interests before that day.
(6) If you *acquired some of your original interests before 20 September 1985, you are taken to have acquired a reasonable whole number of your new interests before that day having regard to:
(a) the *market values of your original interests and your remaining original interests just after the *demerger, or an anticipated reasonable approximation of those market values; and
(b) the market values of your new interests just after the demerger, or an anticipated reasonable approximation of those market values.
(7) If a proportion, but not all, of your original interests ends under the *demerger and you *acquired some of your original interests before 20 September 1985, that same proportion of those interests you acquired before that day ends.
Note: CGT event K6 may be relevant if you later dispose of your interests that are treated as being pre‑CGT.
Example: Bert owned 100 shares in a company of which 50 were acquired pre‑CGT. Under a demerger 20 of Bert’s 100 shares were cancelled in exchange for new interests. As 20% of his shares were cancelled, 10 of his pre‑CGT shares are taken to have been cancelled.
(8) If you choose a roll‑over for some but not all of your original interests, you apply the rules in this section as if your original interests for which you chose the roll‑over were your only original interests.
125‑85 Cost base adjustments where CGT event happens but no roll‑over chosen
(1) You must adjust the *cost base and *reduced cost base of an *ownership interest you own in a company or trust if:
(a) a *demerger happens to a *demerger group of which the company or trust is a member; and
(b) you owned an original interest in the *head entity of the demerger group just before the demerger; and
(c) a *CGT event happens to the original interest and you *acquire a new interest under the demerger; and
(d) you do not choose a roll‑over under this Subdivision for the original interest.
(2) The adjustments you must make are the same as the adjustments you would have to make under section 125‑80 for the *cost bases and *reduced cost bases of the remaining original interests and new interests just after the *CGT event if you could have chosen a roll‑over under this Subdivision for the *demerger and you had done so.
125‑90 Cost base adjustments where no CGT event
(1) You must adjust the *cost base and *reduced cost base of an *ownership interest you own in a company or trust if:
(a) a *demerger happens to a *demerger group of which the company or trust is a member; and
(b) you owned an original interest in the *head entity of the demerger group just before the demerger; and
(c) no *CGT event happens to the original interest, but you *acquire a new interest under the demerger.
(2) The adjustments you must make are the same as the adjustments you would have to make under section 125‑80 if you could have chosen a roll‑over under this Subdivision for the *demerger and you had done so.
125‑95 No other cost base adjustment after demerger
If you have to make adjustments to the *cost base and *reduced cost base of your *ownership interests under section 125‑80, 125‑85 or 125‑90 because of a *demerger, no other adjustment can be made under this Act to those cost bases and reduced cost bases because of something that happens under the demerger.
Note: Those sections deal with any value shift that might occur under the demerger and avoid the need for the general value shifting regime to apply.
125‑100 No further demerger relief in some cases
This Division does not apply to the remaining *ownership interests in a *demerged entity if one or more members of the *demerger group *disposed of or cancelled less than 100% of the total ownership interests of that group in the demerged entity.
Note: After the demerger, a former member of the demerger group can undertake a further demerger to which this Division can apply.
Subdivision 125‑C—Consequences for members of demerger group
125‑150 Guide to Subdivision 125‑C
Certain capital gains and capital losses that members of a demerger group make under a demerger are disregarded.
Certain capital losses made under a demerger are reduced where the demerger results in a value shift.
Table of sections
Operative provisions
125‑155 Certain capital gains or losses disregarded for demerging entity
125‑160 No CGT event J1
125‑165 Adjusted capital loss for value shift under a demerger
125‑170 Reduced cost base reduction if demerger asset subject to roll‑over
125‑155 Certain capital gains or losses disregarded for demerging entity
Any *capital gain or *capital loss a *demerging entity makes from *CGT event A1, *CGT event C2, *CGT event C3 or *CGT event K6 happening to its *ownership interests in a *demerged entity under a *demerger is disregarded.
Note 1: The full list of CGT events is in section 104‑5.
Note 2: This section will not apply if section 125‑100 applies.
*CGT event J1 does not happen to a *demerged entity or a member of a *demerger group under a *demerger.
125‑165 Adjusted capital loss for value shift under a demerger
A *capital loss made by an entity that was a member of a *demerger group from a *CGT event happening to a *CGT asset under a *demerger or after a demerger is reduced to the extent that the capital loss is reasonably attributable to a reduction in the *market value of the asset because of the demerger.
Example: The market value of equity or loan interests in the demerging entity may be reduced by the disposal, for inadequate value, of ownership interests of another member of the demerger group to owners of original interests in the head entity of the group.
125‑170 Reduced cost base reduction if demerger asset subject to roll‑over
(1) The *reduced cost base of a *CGT asset is reduced if:
(a) the *market value of the asset is reduced because of a *demerger; and
(b) after the demerger the asset is *acquired by an entity from another entity (the transferor) in a situation where the transferor obtained a roll‑over for the disposal; and
(c) the reduction occurred when the transferor owned the asset.
(2) The *reduced cost base of the asset as determined under the roll‑over is reduced just after the roll‑over to the extent of the reduction in *market value caused by the *demerger.
Note: The rules in section 125‑165 and this section deal with any value shift that might occur under the demerger and avoid the need for the general value shifting regime to apply.
(3) If the *reduced cost base of a *CGT asset is reduced under this section because of a *demerger, no other adjustment can be made under this Act to that reduced cost base because of something that happens under the demerger.
Subdivision 125‑D—Corporate unit trusts and public trading trusts
125‑225 Guide to Subdivision 125‑D
This Division applies to corporate unit trusts and public trading trusts as if they were companies.
Table of sections
Operative provisions
125‑230 Application of Division to corporate unit trusts and public trading trusts
125‑230 Application of Division to corporate unit trusts and public trading trusts
This Division applies to a trust to which section 102K or 102S of the Income Tax Assessment Act 1936 applies for an income year in which a *demerger happens as if:
(a) the trust were a company; and
(b) *ownership interests in it were interests in a company.
Division 126—Same‑asset roll‑overs
Table of Subdivisions
Guide to Division 126
126‑A Marriage breakdown
126‑B Companies in the same wholly‑owned group
126‑C Changes to trust deeds
126‑D Small superannuation funds
126‑E Entitlement to shares after demutualisation and scrip for scrip roll‑over
126‑F Transfer of assets of superannuation funds to meet licensing requirements
126‑1 What this Division is about
A same‑asset roll‑over allows a capital gain or loss an entity makes from disposing of a CGT asset to, or creating a CGT asset in, another entity to be disregarded. For a disposal, certain attributes of the asset are transferred to the receiving entity.
Subdivision 126‑A—Marriage breakdown
Table of sections
126‑5 CGT event involving spouses
126‑15 CGT event involving company or trustee
126‑20 Subsequent CGT event happening to roll‑over asset where transferor was a CFC or a non‑resident trust
126‑25 Conditions for the purposes of subsections 126‑5(3A) and 126‑15(5)
126‑5 CGT event involving spouses
(1) There is a roll‑over if a *CGT event (the trigger event) happens involving an individual (the transferor) and his or her *spouse (the transferee), or a former *spouse (also the transferee), because of:
(a) a court order under the Family Law Act 1975 or a corresponding *foreign law; or
(b) a maintenance agreement approved by a court under section 87 of that Act or a corresponding agreement approved by a court under a corresponding *foreign law; or
(c) a court order under a *State law, *Territory law or *foreign law relating to de facto marriage breakdowns; or
(d) something done under:
(i) a financial agreement made under Part VIIIA of the Family Law Act 1975 that is binding because of section 90G of that Act; or
(ii) a corresponding written agreement that is binding because of a corresponding foreign law; or
(e) something done under:
(i) an award made in an arbitration referred to in section 13H of the Family Law Act 1975; or
(ii) a corresponding award made in an arbitration under a corresponding State law, Territory law or foreign law; or
(f) something done under a written agreement:
(i) that is binding because of a State law, Territory law or foreign law relating to de facto marriage breakdowns; and
(ii) that, because of such a law, cannot be overridden by an order of a court (except to avoid injustice).
(2) Only these *CGT events are relevant:
(a) CGT events A1 and B1 (a disposal case); and
(b) CGT events D1, D2, D3 and F1 (a creation case).
Note: The full list of CGT events is in section 104‑5.
(3) However, there is no roll‑over if:
(a) the *CGT asset involved is *trading stock of the transferor; or
(b) for *CGT event B1—title in the CGT asset does not pass to the transferee at or before the end of the agreement.
(3A) There is no roll‑over because of paragraph (1)(d) or (f) unless the conditions set out in section 126‑25 are met.
(4) A *capital gain or a *capital loss the transferor makes from the *CGT event is disregarded.
Consequences for the transferee (disposal case)
(5) For a disposal case where the transferor *acquired the asset on or after 20 September 1985:
(a) the first element of the asset’s *cost base (in the hands of the transferee) is the asset’s cost base (in the hands of the transferor) at the time the transferee acquired it; and
(b) the first element of the asset’s *reduced cost base (in the hands of the transferee) is worked out similarly.
Example: Your spouse transfers land to you because of a court order under the Family Law Act 1975. Any capital gain or loss your spouse makes is disregarded.
If the land’s cost base at the time you acquired it is $10,000, the first element of the land’s cost base in your hands becomes $10,000.
Note 1: There are special indexation rules for roll‑overs: see Division 114.
Note 2: A roll‑over under this Subdivision may have an effect on the transferee’s main residence exemption: see sections 118‑178 and 118‑180.
(6) For a disposal case where the transferor *acquired the asset before 20 September 1985, the transferee is taken to have acquired it before that day.
Note: A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.
(7) For a disposal case where the transferor *disposed of a *collectable or *personal use asset, the transferee is taken to have *acquired one.
Note 1: Capital losses from collectables can be subtracted only from capital gains from collectables: see section 108‑10.
Note 2: Capital losses from personal use assets are disregarded: see section 108‑20.
Consequences for the transferee (creation case)
(8) For a creation case, the first element of the asset’s *cost base (in the hands of the transferee) is the amount applicable under this table. The first element of its *reduced cost base is worked out similarly.
|
Creation case |
|
|
Event No. |
Applicable amount |
|
D1 |
the *incidental costs the transferor incurred that relate to the trigger event |
|
D2 |
the expenditure the transferor incurred to grant the option |
|
D3 |
the expenditure the transferor incurred to grant the right |
|
F1 |
the expenditure the transferor incurred on the grant, renewal or extension of the lease |
The expenditure can include giving property: see section 103‑5.
126‑15 CGT event involving company or trustee
(1) There are the roll‑over consequences in section 126‑5 if the trigger event involves a company (the transferor) or a trustee (also the transferor) and a *spouse or former spouse (the transferee) of another individual because of:
(a) a court order under the Family Law Act 1975 or a corresponding *foreign law; or
(b) a maintenance agreement approved by a court under section 87 of that Act or a corresponding agreement approved by a court under a corresponding *foreign law; or
(c) a court order under a *State law, *Territory law or *foreign law relating to de facto marriage breakdowns; or
(d) something done under:
(i) a financial agreement made under Part VIIIA of the Family Law Act 1975 that is binding because of section 90G of that Act; or
(ii) a corresponding written agreement that is binding because of a corresponding foreign law; or
(e) something done under:
(i) an award made in an arbitration referred to in section 13H of the Family Law Act 1975; or
(ii) a corresponding award made in an arbitration under a corresponding State law, Territory law or foreign law; or
(f) something done under a written agreement:
(i) that is binding because of a State law, Territory law or foreign law relating to de facto marriage breakdowns; and
(ii) that, because of such a law, cannot be overridden by an order of a court (except to avoid injustice).
(2) There are other consequences if:
(a) just before the time of the trigger event, an entity (including the transferee) owned another *CGT asset of a kind covered by this table; and
(b) the entity *acquired it on or after 20 September 1985; and
(c) a *CGT event happens in relation to it.
|
Relevant CGT assets |
||
|
Item |
For this transferor: |
The entity can own these assets: |
|
1 |
Company |
(a) a *share in the company; or (b) a loan to the company; or (c) an indirect interest (through one or more interposed companies or trusts) in a *share in, or loan to, the company |
|
2 |
Trustee |
(a) an interest or unit in the trust; or (b) a loan to the trustee; or (c) an indirect interest (through one or more interposed companies or trusts) in an interest or unit in the trust or in a loan to the trustee |
Example: An individual owns all the shares in a company. The company owns land. The individual’s marriage breaks down. The Family Court orders that the company transfer the land it owns to the individual’s spouse. The individual later sells the shares.
(3) The *cost base and *reduced cost base of the other asset are reduced by an amount that reasonably reflects the fall in its *market value because of the trigger event. The reduction occurs at the time of the trigger event.
(4) If the entity owning the other asset is also the transferee, the *cost base and *reduced cost base of the other asset are then increased by any amount that is included in the entity’s assessable income for any income year because of the trigger event.
Note: The reduced cost base may be modified for a roll‑over happening after a demerger: see section 125‑175.
(5) There is no roll‑over because of paragraph (1)(d) or (f) unless the conditions set out in section 126‑25 are met.
(1) This section applies if:
(a) there is a roll‑over for the trigger event under section 126‑15; and
(b) the transferor was:
(i) a *CFC; or
(ii) a trustee of a trust that is a non‑resident trust estate within the meaning of section 102AAB of the Income Tax Assessment Act 1936 for the income year of the trigger event; and
(c) section 126‑15 is relevant to:
(i) the calculation of the *attributable income of the CFC under Division 7 of Part X of the Income Tax Assessment Act 1936; or
(ii) the calculation of the attributable income of the trust under Subdivision D of Division 6AAA of Part III of that Act;
because (ignoring the residency assumptions in that Division or Subdivision) the roll‑over asset was not *taxable Australian property; and
(d) a subsequent *CGT event happens in relation to the roll‑over asset.
(2) In working out the amount of any *capital gain or *capital loss the transferee (or a subsequent owner of the roll‑over asset if there is a series of roll‑overs until there is no roll‑over) makes when a subsequent *CGT event happens in relation to the asset, the modifications specified in Division 7 of Part X, or Subdivision D of Division 6AAA of Part III, of the Income Tax Assessment Act 1936 apply.
126‑25 Conditions for the purposes of subsections 126‑5(3A) and 126‑15(5)
(1) The conditions referred to in subsections 126‑5(3A) and 126‑15(5) are that:
(a) at the time of the trigger event:
(i) the *spouses, or former spouses, involved are separated; and
(ii) there is no reasonable likelihood of cohabitation being resumed; and
(b) the trigger event happened because of reasons directly connected with the breakdown of the marriage or de facto marriage.
(2) For the purposes of this section, the question whether *spouses or former spouses have separated is to be determined in the same way as it is for the purposes of section 48 of the Family Law Act 1975 (as affected by sections 49 and 50 of that Act).
Subdivision 126‑B—Companies in the same wholly‑owned group
126‑40 What this Subdivision is about
A roll‑over may be available for the transfer of a CGT asset between 2 companies, or the creation of a CGT asset by one company in another, if:
(a) both companies are members of the same wholly‑owned group; and
(b) at least one of the companies is a foreign resident.
Table of sections
Operative provisions
126‑45 Roll‑over for members of wholly‑owned group
126‑50 Requirements for roll‑over
126‑55 When there is a roll‑over
126‑60 Consequences of roll‑over
126‑75 Originating company is a CFC
126‑85 Effect of roll‑over on certain liquidations
126‑45 Roll‑over for members of wholly‑owned group
(1) There may be a roll‑over if a *CGT event (the trigger event) happens involving a company (the originating company) and another company (the recipient company) in the circumstances set out in section 126‑50.
(2) Only these *CGT events are relevant:
(a) CGT events A1 and B1 (a disposal case); and
(b) CGT events D1, D2, D3 and F1 (a creation case).
Note: The full list of CGT events is in section 104‑5.
(3) However, there is no roll‑over for *CGT event B1 if title in the *CGT asset does not pass to the transferee at or before the end of the agreement.
Note: CGT event J1 can happen if the recipient company stops being a 100% subsidiary of a company in the relevant group: see section 104‑175.
126‑50 Requirements for roll‑over
(1) The originating company and recipient company must be members of the same *wholly‑owned group at the time of the trigger event.
Note: This requirement is taken to be satisfied in the case of the transfer of the life insurance business of a life insurance company: see section 121AS of the Income Tax Assessment Act 1936.
(2) The *CGT asset involved (the roll‑over asset) must not be *trading stock of the recipient company just after the time of the trigger event.
(3) If:
(a) the roll‑over asset is a right or *convertible interest referred to in Division 130, or an option referred to in Division 134, or an *exchangeable interest; and
(b) the recipient company *acquires another *CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest;
the other asset cannot become *trading stock of the recipient company just after the recipient company acquired it.
(4) The *ordinary income and *statutory income of the recipient company must not be exempt from income tax because it is an *exempt entity for the income year of the trigger event.
(5) The requirements in one of the items in this table must be satisfied.
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Additional requirements |
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Item |
At the time of the trigger event the originating company must be: |
At the time of the trigger event the recipient company must be: |
The roll‑over asset must be taxable Australian property: |
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1 |
Either: (a) a foreign resident; or (b) an Australian resident but not a *prescribed dual resident |
A foreign resident |
Either: (a) just before and just after the trigger event, for a disposal case; or (b) just after that event, for a creation case |
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2 |
A foreign resident |
An Australian resident but not a *prescribed dual resident |
Either: (a) just before the trigger event, for a disposal case; or (b) just after that event, for a creation case |
(6) If the originating company or the recipient company is an Australian resident at the time of the trigger event, that company must:
(a) be a *member of a *consolidated group or *MEC group at that time; or
(b) not be a member of a *consolidatable group at that time.
(7) If the originating company is a foreign resident, it must not have *acquired the *CGT asset described in subsection (8) because of:
(a) a single *CGT event giving rise to a roll‑over under a previous application of this Subdivision (as amended by the New Business Tax System (Consolidation) Act (No. 1) 2002) involving an Australian resident originating company other than the company that is the recipient company for the current application of this Subdivision; or
(b) a series (whether or not it is the longest possible series) of consecutive CGT events giving rise to roll‑overs under previous applications of this Subdivision (as amended by the New Business Tax System (Consolidation) Act (No. 1) 2002), the earliest involving an Australian resident originating company other than the company that is the recipient company for the current application of this Subdivision.
(8) Subsection (7) operates in relation to the *CGT asset:
(a) that was involved in the trigger event in a disposal case; or
(b) because of which the originating company was able to create the CGT asset that was involved in the trigger event in a creation case.
(9) Subsection (7) does not apply if each of the following companies mentioned in that subsection:
(a) the recipient company for the roll‑over under the current application of this Subdivision;
(b) the Australian resident originating company for the roll‑over under:
(i) for paragraph (7)(a)—the previous application of this Subdivision; or
(ii) for paragraph (7)(b)—the earliest previous application of this Subdivision for that series of consecutive *CGT events;
was, at the time of its roll‑over, the *head company of the same *MEC group.
126‑55 When there is a roll‑over
Capital gain or no loss
(1) There is a roll‑over if:
(a) either:
(i) the trigger event would have resulted in the originating company making a *capital gain, or making no *capital loss and not being entitled to a deduction; or
(ii) the originating company *acquired the roll‑over asset before 20 September 1985; and
(b) the originating company and recipient company both choose to obtain it.
Note: Section 103‑25 sets out when the choice must be made.
126‑60 Consequences of roll‑over
Consequences for the originating company in all cases
(1) A *capital gain the originating company makes from the trigger event is disregarded.
Consequences for the recipient company (disposal case)
(2) For a disposal case, if the originating company *acquired the roll‑over asset on or after 20 September 1985:
(a) the first element of the asset’s *cost base (in the hands of the recipient company) is the asset’s cost base (in the hands of the originating company) when the recipient company acquired it; and
(b) the first element of the asset’s *reduced cost base (in the hands of the recipient company) is worked out similarly.
Note 1: There are special indexation rules for roll‑overs: see Division 114.
Note 2: The reduced cost base may be modified for a roll‑over happening after a demerger: see section 125‑175.
(3) If the originating company *acquired the roll‑over asset before 20 September 1985, the recipient company is taken to have acquired it before that day.
Note 1: A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see, for example, Division 149.
Note 2: Under section 716‑855, where there have been certain roll‑overs, the cost base and reduced cost base of pre‑CGT assets for the purposes of Part 3‑90 (Consolidated groups) are worked out by applying subsection (2), rather than subsection (3), of this section.
(4) If the trigger event involved a *personal use asset of the originating company, the recipient company is taken to have *acquired one.
Consequences for the recipient company (creation case)
(5) For a creation case, the first element of the asset’s *cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its *reduced cost base is worked out similarly.
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Creation case |
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Event No. |
Applicable amount |
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D1 |
the *incidental costs the originating company incurred that relate to the trigger event |
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D2 |
the expenditure the originating company incurred to grant the option |
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D3 |
the expenditure the originating company incurred to grant the right |
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F1 |
the expenditure the originating company incurred on the grant, renewal or extension of the lease |
The expenditure can include giving property: see section 103‑5.
Note: CGT event J1 may occur if the recipient company stops being a member of the wholly‑owned group while still owning the roll‑over asset: see section 104‑175.
126‑75 Originating company is a CFC
(1) This section applies if:
(a) there is a roll‑over for the trigger event under this Subdivision; and
(b) the originating company was a *CFC at the time of the trigger event; and
(c) this Subdivision is relevant to the calculation of the *attributable income of the originating company under Division 7 of Part X of the Income Tax Assessment Act 1936 because (ignoring the residency assumptions in that Division) the roll‑over asset was not *taxable Australian property for the originating company; and
(d) a subsequent *CGT event happens in relation to the roll‑over asset.
(2) In working out the amount of any *capital gain or *capital loss the recipient company (or a subsequent owner of the roll‑over asset if there is a series of roll‑overs until there is no roll‑over) makes when a subsequent *CGT event happens in relation to the asset, the modifications specified in Division 7 of Part X of the Income Tax Assessment Act 1936 apply.
126‑85 Effect of roll‑over on certain liquidations
(1) A *capital gain a company (the holding company) makes because *shares in its *100% subsidiary are cancelled (an example of *CGT event C2: see section 104‑25) on the liquidation of the subsidiary is reduced if the conditions in subsection (2) are satisfied. The reduction is worked out under subsection (3).
(2) These conditions must be satisfied:
(a) there must be a roll‑over under this Subdivision for at least one *CGT asset that the subsidiary *acquired on or after 20 September 1985 (the CGT roll‑over asset) being *disposed of by the subsidiary to the holding company in the course of the liquidation of the subsidiary;
(c) the disposals must either:
(i) be part of the liquidator’s final distribution in the course of the liquidation; or
(ii) have occurred within 18 months of the dissolution of the subsidiary if they are part of an interim distribution in the course of the liquidation;
(d) the holding company must have beneficially owned all of the shares in the subsidiary for the whole period from the time of the disposal, or the first disposal, of a CGT roll‑over asset until the cancellation of the shares;
(e) the *market value of the CGT roll‑over asset or assets must comprise at least part of the *capital proceeds for the cancellation of the shares in the subsidiary that are beneficially owned by the holding company;
(f) one or more of the shares that were cancelled (the post‑CGT shares) must have been acquired by the holding company on or after 20 September 1985.
(3) The reduction of the *capital gain is worked out in this way.
Method statement
Step 1. Work out (disregarding this section) the sum of the *capital gains and the sum of the *capital losses the holding company would make on the cancellation of its shares in the subsidiary.
Step 2. Work out (disregarding this Subdivision):
(a) the sum of the *capital gains the subsidiary would make on the *disposal of its CGT roll‑over assets to the holding company; and
(b) the sum of the *capital losses it would make except for Subdivision 170‑D on the disposal of its *CGT assets to the holding company;
in the course of the liquidation assuming the *capital proceeds were the assets’ *market values at the time of the disposal.
Step 3. If, after subtracting the sum of the *capital losses from the sum of the *capital gains, there is an overall capital gain from step 1 and an overall capital gain from step 2, then continue. Otherwise there is no adjustment.
Step 4. Express the number of post‑CGT shares as a fraction of the total number of shares the holding company owned in the subsidiary.
Step 5. Multiply the overall *capital gain from Step 2 by the fraction from Step 4.
Step 6. Reduce the overall *capital gain from Step 1 by the amount from Step 5. The result is the *capital gain the holding company makes from the cancellation of its shares in the subsidiary.
Note: This Subdivision is modified in calculating the attributable income of a CFC: see section 419 of the Income Tax Assessment Act 1936.
Subdivision 126‑C—Changes to trust deeds
126‑125 What this Subdivision is about
This Subdivision sets out when there is a roll‑over for a CGT event that happens because of an amendment to or replacement of the trust deed of a complying approved deposit fund, a complying superannuation fund or a fund that accepts worker entitlement contributions.
Table of sections
126‑130 Changes to trust deeds
126‑135 Consequences of roll‑over
126‑130 Changes to trust deeds
(1) There is a roll‑over if:
(a) *CGT event E1 or E2 happens in relation to a *CGT asset because the trust deed of a *complying approved deposit fund or *complying superannuation fund is amended or replaced; and
(b) the amendment or replacement is done for the purpose of:
(i) complying with the Superannuation Industry (Supervision) Act 1993; or
(ii) enabling a *complying approved deposit fund to become a *complying superannuation fund; and
(c) the assets and members of the fund do not change as a consequence of the amendment or replacement.
Note: The full list of CGT events is in section 104‑5.
(2) There is a roll‑over if:
(a) *CGT event E1 or E2 happens in relation to a *CGT asset because the trust deed of a fund is amended or replaced; and
(b) the amendment or replacement is done for the purpose of having the fund approved as an approved worker entitlement fund under subsection 58PB(2) of the Fringe Benefits Tax Assessment Act 1986; and
(c) the assets and members of the fund do not change as a consequence of the amendment or replacement.
Note: The full list of CGT events is in section 104‑5.
126‑135 Consequences of roll‑over
(1) A *capital gain or *capital loss made from the *CGT event is disregarded.
(2) If the fund that owned the *CGT asset just before the time of the *CGT event *acquired it before 20 September 1985, the asset retains its status as a *pre‑CGT asset in the hands of the fund that owned it after the time of the event.
(3) If the fund that owned the *CGT asset just before the time of the *CGT event *acquired it on or after 20 September 1985:
(a) the first element of the asset’s *cost base (in the hands of the fund that owned the asset after the time of the event) is its cost base just before that time; and
(b) the first element of the asset’s *reduced cost base asset is worked out similarly; and
(c) the fund that owned the asset after the time of the event is taken to have acquired the asset at that time.
Subdivision 126‑D—Small superannuation funds
Table of sections
126‑140 CGT event involving small superannuation funds
126‑140 CGT event involving small superannuation funds
Payment splits under Family Law Act
(1) There is a roll‑over if:
(a) an interest in a *small superannuation fund is subject to a *payment split; and
(b) the *non‑member spouse in relation to that interest serves a waiver notice under section 90MZA of the Family Law Act 1975 in respect of that interest; and
(c) as a result of serving the notice, the trustee (the transferor) of the fund transfers a *CGT asset to the trustee (the transferee) of another small superannuation fund for the benefit of the non‑member spouse.
Note: CGT event E2 may apply to the transfer.
Payment splits under the Superannuation Industry (Supervision) Regulations
(2) There is also a roll‑over if:
(a) an interest in a *small superannuation fund (the first fund) is subject to a *payment split; and
(b) as a result of the payment split, there is a transfer or roll over of benefits, for the benefit of the *non‑member spouse, from the first fund to another small superannuation fund; and
(c) the transfer is under provisions of the Superannuation Industry (Supervision) Regulations 1994 dealing with superannuation interests that are subject to payment splits; and
(d) in order to give effect to the payment split, the trustee (the transferor) of the first fund transfers a *CGT asset to the trustee (the transferee) of the other fund for the benefit of the non‑member spouse.
Note: CGT event E2 may apply to the transfer.
Roll‑over consequences
(3) A *capital gain or *capital loss the transferor makes from the transfer of the asset is disregarded.
(4) If the transferor *acquired the asset on or after 20 September 1985:
(a) the first element of the asset’s *cost base (in the hands of the transferee) is the asset’s cost base (in the hands of the transferor) at the time the transferee acquired it; and
(b) the first element of the asset’s *reduced cost base (in the hands of the transferee) is worked out similarly.
(5) If the transferor *acquired the asset before 20 September 1985, the transferee is taken to have acquired it before that day.
Note: A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.
Subdivision 126‑E—Entitlement to shares after demutualisation and scrip for scrip roll‑over
126‑185 What this Subdivision is about
This Subdivision sets out when there is a roll‑over for a CGT event that happens because a beneficiary becomes absolutely entitled to a share as against the trustee where the trustee obtained a roll‑over under Subdivision 124‑M following a demutualisation.
Table of sections
Operative provisions
126‑190 When there is a roll‑over
126‑195 Consequences of roll‑over
126‑190 When there is a roll‑over
There is a roll‑over if:
(a) an insurance company demutualises; and
(b) the trustee of a trust holds a *share issued under the demutualisation in trust for an entity to whom the share would have been issued if the entity could, and were in a position to, prove the entity’s entitlement to the share; and
(c) the trustee obtains a roll‑over under Subdivision 124‑M of this Act (Scrip for scrip roll‑over) for the share because the trustee exchanges the share for a share (the replacement share) in another company (whether or not the trustee receives something in addition to the replacement share); and
(d) a *CGT event happens in relation to the replacement share because the entity becomes absolutely entitled to the share as against the trustee.
126‑195 Consequences of roll‑over
(1) A *capital gain or *capital loss the trustee makes from the *CGT event is disregarded.
(2) The first element of the *cost base of the replacement share for the entity is the cost base of the replacement share in the hands of the trustee just before the *CGT event happened. The first element of the *reduced cost base of the replacement share for the entity is worked out similarly.
Example: The JB mutual insurance company demutualises, issuing shares in JB Limited to its policyholders. It is unable to locate some of its policyholders so it establishes a trust and issues shares to the trustee on behalf of those policyholders. Steve is one of those policyholders (being potentially entitled to 50 shares).
JB Limited is taken over by PVDM Limited. Members of JB are issued with 2 shares in PVDM for each share they have in JB. The trustee obtains a roll‑over under Subdivision 124‑M for the exchange. Each PVDM share held by the trustee has a cost base and reduced cost base of $15.
Steve writes to the trustee and proves his entitlement to the shares held in trust for him.
There is a roll‑over under this Subdivision so that any capital gain or loss made by the trustee is disregarded. The first element of the cost base and reduced cost base of each of Steve’s PVDM shares is $15.
Subdivision 126‑F—Transfer of assets of superannuation funds to meet licensing requirements
126‑200 What this Subdivision is about
There is a roll‑over for the transfer of assets of a superannuation fund to one or more other superannuation funds that is made between 30 June 2004 and 1 July 2006 because the trustee of the first fund will not be licensed by 1 July 2006 and the other funds have or will have licensed trustees.
Table of sections
Operative provisions
126‑205 Object of this Subdivision
126‑210 When there is a roll‑over and what its effects are
126‑205 Object of this Subdivision
The object of this Subdivision is to encourage compliance with the requirements of the Superannuation Industry (Supervision) Act 1993 for the licensing of trustees of registrable superannuation entities.
126‑210 When there is a roll‑over and what its effects are
When there is a roll‑over
(1) There is a roll‑over if:
(a) after 30 June 2004 and before 1 July 2006, one or more *CGT events happen because the trustee (the first RSE trustee) of a registrable superannuation entity, as defined in section 10 of the Superannuation Industry (Supervision) Act 1993, ceases to hold all its *CGT assets; and
(b) because of the cessation, CGT assets (the identical assets) that, together, are identical to all the first RSE trustee’s CGT assets just before the CGT events start to be held after 30 June 2004 and before 1 July 2006 by:
(i) the trustee (the successor RSE trustee) of another such registrable superannuation entity; or
(ii) the trustees (each of whom is a successor RSE trustee) of 2 or more other such registrable superannuation entities;
(whether or not all the identical assets were the first RSE trustee’s assets just before the CGT events); and
(c) the cessation and starting occur because:
(i) it is reasonable to assume that the first RSE trustee will not have an RSE licence under Part 2A of that Act by 1 July 2006; and
(ii) each successor RSE trustee has such an RSE licence, or it is reasonable to assume that each successor RSE trustee will have such an RSE licence by 1 July 2006.
Note: Under section 10 of the Superannuation Industry (Supervision) Act 1993, registrable superannuation entity is defined as covering certain kinds of superannuation funds, approved deposit funds and pooled superannuation trusts.
Effects of the roll‑over
(2) A *capital gain or *capital loss the first RSE trustee makes from each of the *CGT events is disregarded.
(3) For a successor RSE trustee, the first element of the *cost base of each of the identical assets the successor RSE trustee holds is the cost base of the corresponding asset for the first RSE trustee at the time of the relevant *CGT event.
(4) For a successor RSE trustee, the first element of the *reduced cost base of each of the identical assets the successor RSE trustee holds is the reduced cost base of the corresponding asset for the first RSE trustee at the time of the relevant *CGT event.
Example: There is a roll‑over if the first RSE trustee had a block of land and 10,000 units in a unit trust and the following events happen on 30 June 2006 because the first RSE trustee does not have an RSE licence but each of the 2 successor RSE trustees (successor RSE trustee A and successor RSE trustee B) does:
(a) the first RSE trustee transfers the block to successor RSE trustee A;
(b) the first RSE trustee’s units in the unit trust are cancelled at the first RSE trustee’s request;
(c) 10,000 identical units in the unit trust are issued to successor RSE trustee B because of the cancellation.
The first RSE trustee disregards any capital gain or capital loss from the transfer of the block or the cancellation of the units.
The first element of successor RSE trustee A’s cost base and reduced cost base for the block is the same as the first RSE trustee’s cost base and reduced cost base respectively for the block at the time of the transfer.
The first element of successor RSE trustee B’s cost base and reduced cost base for the units issued to successor RSE trustee B is the same as the first RSE trustee’s cost base and reduced cost base respectively for its units at the time they were cancelled.
(5) A successor RSE trustee