Tax Law Improvement Act (No. 1) 1998 (46 of 1998)

2   CGT (new Parts 3-1, 3-3 and 3-5)

3   Consequential amendment of the Income Tax Assessment Act 1936

110   Subsections 26BC(9) and (9A)

Repeal the subsections, substitute:

(9) For the purpose of applying Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to the borrower:

(a) if the borrower disposes of the borrowed security to a third party:

(i) the first element of the cost base and reduced cost base of the borrowed security (in the hands of the borrower) is taken to be its market value when the borrower acquired it; and

(ii) when the borrower disposes of a replacement security to the lender, the capital proceeds from that CGT event are taken to be that market value; and

(b) if no third party is involved - the transactions referred to in paragraph (3)(a) are ignored.

(9A) For the purpose of applying Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to the borrower, the incidental costs to the borrower of the acquisition of an eligible security covered by sub-subparagraph (3)(a)(ii)(B) include a compensatory payment incurred by the borrower (to the extent that the borrower has not deducted and cannot deduct it).