Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 725 - Direct value shifting affecting interests in companies and trusts  

Subdivision 725-D - Consequences for down interest or up interest as CGT asset  

SECTION 725-240   CGT consequences; meaning of adjustable value  

725-240(1)    
The CGT consequences for you of a ^* direct value shift are of one or more of these 3 kinds:

(a)    there are one or more ^* taxing events generating a gain for ^* down interests of which you are an affected owner (see subsection (2) );

(b)    the ^* cost base and ^* reduced cost base of down interests of which you are an ^* affected owner are reduced (see subsection (3) );

(c)    the cost base and reduced cost base of ^* up interests of which you are an affected owner are uplifted (see subsection (4) ).

Note:

If there is a taxing event generating a gain, CGT event K8 happens. See section 104-250 .

Taxing event generating a gain

725-240(2)    
To work out:

(a)    whether under the table in section 725-245 there is a ^* taxing event generating a gain for you on a ^* down interest; and

(b)    if so, the amount of the gain;

assume that the adjustable value from time to time of that or any other ^* equity or loan interest in the ^* target entity is its ^* cost base.

Note:

For example, for that purpose the question whether the interest has a pre-shift gain or a pre-shift loss is determined on the basis that the interest ' s adjustable value is its cost base.

Reduction or uplift of cost base and reduced cost base

725-240(3)    
The ^* cost base and the ^* reduced cost base of a ^* down interest are reduced at the ^* decrease time to the extent that section 725-250 provides for the ^* adjustable value of the interest to be reduced.

725-240(4)    
The ^* cost base and the ^* reduced cost base of an ^* up interest are uplifted at the ^* increase time to the extent that section 725-250 provides for the ^* adjustable value of the interest to be uplifted.

725-240(5)    

However, the ^* cost base or ^* reduced cost base is uplifted only to the extent that the amount of the uplift is still reflected in the *market value of the interest when a later ^* CGT event happens to the interest.

725-240(6)    
To work out:

(a)    whether the ^* cost base or ^* reduced cost base of the interest is reduced or uplifted; and

(b)    if so, by how much;

assume that:

(c)    the adjustable value from time to time of that or any other ^* equity or loan interest in the ^* target entity is its cost base or reduced cost base, as appropriate; and

(d)    if the interest is an ^* up interest because it was issued at a ^* discount - the adjustable value of the interest immediately before it was issued was its cost base or reduced cost base, as appropriate, when it was issued.

Note:

For example, for that purpose the question whether the interest has a pre-shift gain or a pre-shift loss is determined on the basis that the interest ' s adjustable value is its cost base or reduced cost base, as appropriate.

Reductions and uplifts also apply to pre-CGT assets

725-240(7)    
A reduction or uplift occurs regardless of whether the entity that owns the interest ^* acquired it before, on or after 20 September 1985.