ATO Interpretative Decision
ATO ID 2004/457 (Withdrawn)
Income Tax
Capital gains tax: Demerger - CGT status of new interest - no CGT event happened to pre-CGT original interestFOI status: may be released
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This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.This document incorporates revisions made since original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.
Status of this decision: Decision Withdrawn 15 January 2010
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Does section 125-90 of the IncomeTax Assessment Act 1997 (ITAA 1997) provide that the taxpayer, the owner of an original interest acquired before 20 September 1985, has acquired a new interest in a demerged entity before this date where no CGT event happened under a demerger to the original interest?
Decision
No. Section 125-90 of the ITAA 1997 does not provide that the taxpayer has acquired a new interest in a demerged entity before 20 September 1985 where no CGT event happened under a demerger to the original interest acquired before 20 September 1985.
Facts
The taxpayer acquired shares (original interests) in the head entity of a demerger group before 20 September 1985 (pre-CGT).
The taxpayer acquired new shares in the demerged entity under a demerger which satisfied the conditions of the definition of a demerger in section 125-70 of the ITAA 1997.
The circumstances of the demerger were such that no CGT event happened to the taxpayer's original interests.
Reasons for Decision
Section 125-80 of the ITAA 1997 allows capital gains tax (CGT) rollover relief when a CGT event happens to an original interest in an entity under a demerger and a new interest is received in the demerged entity.
However, where a demerger happens to a demerger group and no CGT event happens to a pre-CGT original interest, there is no CGT rollover relief available. Subsection 125-90(2) of the ITAA 1997 does not provide for subsections 125-80(4) to (7) of the ITAA 1997 to treat a new interest acquired in a demerged entity as a pre-CGT interest.
Under these circumstances, the taxpayer is not taken to have acquired their new shares in the demerged entity before 20 September 1985.
Date of decision: 12 May 2004Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1997
section 125-70
section 125-80
subsection 125-80(4)
subsection 125-80(5)
subsection 125-80(6)
subsection 125-80(7)
section 125-90
subsection 125-90(2)
ATO ID 2003/875
ATO ID 2004/456
Keywords
Capital gains tax
CGT assets
CGT events
Demerged entity
Demerger
Demerger roll-over
Demerging entity
Pre-CGT assets
Pre-CGT shares
ISSN: 1445-2782
| Date: | Version: | |
| 12 May 2004 | Original statement | |
| You are here → | 15 January 2010 | Archived |