Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 723 - Direct value shifting by creating right over non-depreciating asset  

Subdivision 723-A - Reduction in loss from realising non-depreciating asset  

SECTION 723-15   Reduction in loss from realising non-depreciating asset at the same time as right is created over it  

723-15(1)  
A loss that would, apart from this Division, be * realised for income tax purposes by a * realisation event is reduced by the amount worked out under subsections (2) and (3) if:


(a) the event happens to a * CGT asset (the underlying asset ) you own that, at the time of the event (the realisation time ):


(i) is not a * depreciating asset; or

(ii) is an item of your * trading stock;

(iii) is a * revenue asset of yours; and


(b) at the realisation time, you create in an * associate of yours a right in respect of the underlying asset; and


(c) creating the right involves a * CGT event:


(i) whose * capital proceeds are less than the *market value of the right when created (the difference between those capital proceeds and that market value is called the shortfall on creating the right ); and

(ii) that is not a CGT event that happens to some part of the underlying asset but not to the remainder of it; and


(d) the shortfall on creating the right is more than $50,000; and


(e) the market value of the underlying asset at the realisation time is less than it would have been if the right had not been created (the difference is called the deficit on realisation ).

Note:

If subparagraph (1)(c)(ii) applies, the cost base and reduced cost base of the underlying asset is apportioned under section 112-30 , so there is no need for this section to apply to the right.

723-15(2)  
The amount by which this section reduces the loss is the lesser of:


(a) the shortfall on creating the right; and


(b) the deficit on realisation.

723-15(3)  
For each gain that:


(a) is * realised for income tax purposes by a * realisation event that happens to the right:


(i) within 4 years after the realisation time for the underlying asset; and

(ii) at a time when the right is owned by an entity that is your * associate immediately before the realisation time for the underlying asset; and


(b) is not disregarded;

the amount worked out under subsection (2) is taken to have been reduced by the amount of that gain.

Note 1:

To work out a gain realised for income tax purposes by a realisation event that happens to the right, see sections 977-15 , 977-35 , 977-40 and 977-55 . If more than one of those sections applies to the right, see section 723-50 .

Note 2:

This subsection may require amendment of an assessment for the income year in which the realisation time happens.


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