The general value shifting regime (GVSR) (Divisions 723 to 727 of the ITAA 1997) can apply to value shifts that happen from 1 July 2002.
Broadly, value shifting describes transactions and other arrangements that reduce the value of an asset and (usually) increase the value of another asset.
The GVSR consists of direct value shifting (DVS) and indirect value shifting (IVS) rules that primarily affect equity and loan interests in companies and trusts. There is also a DVS rule dealing with non-depreciating assets over which a right has been created. There are different consequences for particular interests according to whether the interest is held on capital account, as a revenue asset, or as trading stock.
Where the rules apply to a value shift, there may be a deemed gain (but not a loss) adjustment to adjustable values (such as cost bases) or adjustments to losses or gains on the realisation of assets.
There are ‘de minimus’ exceptions and exclusions which will minimise the cost of complying with the GVSR, particularly for small businesses. Entities dealing at arm’s length or on market value terms are generally excluded from the GVSR.
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