ATO Interpretative Decision
ATO ID 2003/362 (Withdrawn)
Income Tax
Capital gains tax: scrip for scrip roll-over - choice not to apply roll-over to all interests exchangedFOI status: may be released
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This ATO ID is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Can a taxpayer choose scrip for scrip roll-over under Subdivision 124-M of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to only some interests exchanged under an arrangement?
Decision
Yes. Roll-over under Subdivision 124-M of the ITAA 1997 can be chosen in respect of some interests exchanged under an arrangement.
Facts
A taxpayer owned shares in ABC Company acquired after 19 September 1985.
XYZ Corporation made an unconditional takeover offer to all shareholders of ABC Company in the 2002-03 income year, offering three shares in itself for each ABC Company share.
The taxpayer accepted the offer. The taxpayer was eligible to choose scrip for scrip roll-over in relation to each share disposed of under the takeover. However, because the taxpayer had net capital losses from earlier years, the taxpayer did not want to choose roll-over for all of the shares.
Reasons for Decision
Each share or interest in a company or trust is considered to be a separate asset for CGT purposes.
There is no requirement in Subdivision 124-M of the ITAA 1997 that a taxpayer must choose to apply scrip for scrip roll-over to all interests that are exchanged under an arrangement.
To the contrary, paragraph 124-780(3)(a) of the ITAA 1997 (about company interests) and paragraph 124-781(3)(a) of the ITAA 1997 (about trust interests) specify that roll-over is not available for interests acquired before 20 September 1985. Further paragraph 124-780(3)(b) of the ITAA 1997 (about company interests) and paragraph 124-781(3)(b) of the ITAA 1997 (about trust interests) provide that roll-over cannot be chosen in respect of an interest for which a capital loss was made.
Therefore, the taxpayer may choose scrip for scrip roll-over in relation to some of their shares disposed of under the arrangement.
Any capital gain the taxpayer makes from shares for which roll-over is not chosen must be included in the calculation of the taxpayer's net capital gain for the income year in which the shares were disposed of.
There are no formal requirements for choosing scrip for scrip roll-over. The way the taxpayer prepares their tax return is sufficient evidence of the making of a choice (subsection 103-25(2) of the ITAA 1997).
Date of decision: 10 April 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
subsection 103-25(2)
Subdivision 124-M
section 124-780
paragraph 124-780(3)(a)
paragraph 124-780(3)(b)
section 124-781
paragraph 124-781(3)(a)
paragraph 124-781(3)(b)
Related Public Rulings (including Determinations)
Taxation Determination TD 2002/4
ATO ID 2003/177
ATO ID 2002/274
ATO ID 2002/891
ATO ID 2002/892
Keywords
Arrangement
Capital gains
Capital losses
CGT choice
Exchange of shares
Net capital gain
Scrip for scrip roll-over
ISSN: 1445-2782
| Date: | Version: | |
| 10 April 2003 | Original statement | |
| You are here | 9 March 2012 | Archived |