ATO Interpretative Decision
ATO ID 2004/8
Income Tax
Capital gains tax: rollover by trustee to wholly owned company - meaning of 'trustee'FOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 rollover under Subdivision 122-A of the Income Tax Assessment Act 1997 (ITAA 1997) precluded, if two or more trustees of a trust dispose of an asset to a company and just after the disposal, the trustees jointly own all the shares in the company?
Decision
No. The requirement in subsection 122-25(1) of the ITAA 1997 that the transferor entity own all the shares in the transferee company just after the disposal of the asset, will be satisfied, because subsection 960-100(2) of the ITAA 1997 treats the trustee of a trust as a single entity, consisting of the persons who are the trustees at any given time.
Facts
Several individuals were appointed as trustees of a trust.
The trustees disposed of all the assets of a business to a company.
The trustees received only shares in the company as consideration for the disposal. They jointly owned all the shares in the company just after the time of the disposal.
The trustees wish to choose rollover under Subdivision 122-A of the ITAA 1997.
Reasons for Decision
An individual or a trustee can choose rollover under Subdivision 122-A of the ITAA 1997 if they dispose of an asset (or all the assets of a business) to a company: section 122-15 of the ITAA 1997.
One of the requirements for rollover is that just after the disposal, the individual or trustee owns all the shares in the company: subsection 122-25(1) of the ITAA 1997.
Therefore, rollover is not available if two or more individuals jointly own an asset, and they both dispose of their interests in the asset to a company in exchange for shares which they jointly own. In such a case, neither will own all the shares in the company just after the disposal, as required by subsection 122-25(1) of the ITAA 1997.
An issue arises as to whether the requirement can be met where a trust has more than one trustee, and those trustees transfer an asset of the trust to a company in exchange for shares issued to the trustees as joint tenants.
Subsection 960-100(2) of the ITAA 1997 provides that the 'trustee of a trust' is taken to be an 'entity consisting of the person who is the trustee, or the persons who are the trustees, at any given time'.
Therefore, for the purpose of determining whether the condition in subsection 122-25(1) of the ITAA 1997 is satisfied, the trustees are treated as a single entity. Accordingly the fact that a trust has several trustees will not prevent the trustees obtaining rollover relief under Subdivision 122-A of the ITAA 1997, provided the other rollover requirements are met.
Date of decision: 4 December 2003Year of income: Year ending 30 June 2004
Legislative References:
Income Tax Assessment Act 1997
Subdivision 122-A
section 122-15
subsection 122-25(1)
subsection 960-100(2)
ATO ID 2002/172
Keywords
Capital gains
Capital gains tax
CGT rollover relief
Trustees
Wholly owned
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 4 December 2003 | Original statement |
| 8 August 2014 | Archived |