ATO Interpretative Decision
ATO ID 2002/172 (Withdrawn)
Income Tax
Income Tax: Capital gains tax: roll-over to a wholly owned companyFOI status: may be released
-
This ATOID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decisionThis document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a replacement asset roll-over available under Subdivision 122-A of the Income Tax Assessment Act 1997 (ITAA 1997) when an asset owned jointly by two or more individuals is disposed of to a company?
Decision
No. A replacement asset roll-over is not available under Subdivision 122-A of the ITAA 1997 when jointly-owned assets are disposed of to a company because the requirement in subsection 122-25(1) of the ITAA 1997 cannot be satisfied.
Facts
The taxpayer owns shares in Company A jointly with their spouse. The issued capital of Company A is made up of ordinary shares.
The other shares of Company A are owned by an unrelated individual.
The taxpayer is considering the effects of a proposed restructure which would result in the taxpayer acquiring non-redeemable shares in Company B as consideration for the jointly owned shares in Company A.
The shares issued by Company B will represent 100% of the shares issued in the company and will be owned jointly in the same proportion as they currently hold shares (inter se) in Company A.
Reasons for Decision
Section 122-15 of the ITAA 1997 provides that an individual can choose to obtain a roll-over if one of certain specified CGT events occur. The disposal to a company of a CGT asset, or all the assets of the business, is a CGT event to which this provision applies. Certain conditions must be fulfilled for roll-over relief to be available.
Section 122-25 of the ITAA 1997 requires that the individual who has disposed of assets to the company must own all the shares in the company just after the time at which the trigger event (i.e., the disposal of assets) occurs.
In this provision the term 'individual' does not include more than one individual. The intent of the legislation is made clear by Act No. 48 of 1991, which introduced a range of CGT partnership amendments including a specific roll-over for partnership assets.
No roll-over is available where the asset to be rolled-over is owned by two or more people. This is so notwithstanding that the shares acquired in exchange for the asset rolled-over may be held in the same proportions as the taxpayers held interests in the asset.
Roll-over may be available if each owner rolled over their interest to a separate company in which they owned all of the shares.
Date of decision: 15 August 2001
Legislative References:
Income Tax Assessment Act 1997
section 122-15
section 122-25
subsection 122-25(1)
Subdivision 122-A
The Act
Keywords
Capital gains tax
CGT rollover relief
CGT replacement asset roll-over
ISSN: 1445-2782
| Date: | Version: | |
| 15 August 2001 | Original statement | |
| You are here | 12 March 2010 | Archived |