INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 17A - Roll-over relief for certain disposals of assets related to small businesses  

Subdivision A - Interpretative provisions  

SECTION 160ZZPL   ASSETS, ACTIVE ASSETS AND ROLL-OVER ASSETS  

160ZZPL(1)   Meaning of asset .  

In this Division:

asset
has the meaning given by section 160A except that it includes any motor vehicle, and includes a part of an asset, but, where the expression is used in relation to an individual who is not acting as a trustee, it does not include:

(a) an asset that is being used solely for the personal use and enjoyment of the individual or an associate of the individual; or

(b) a right to, or to any part of, any allowance, annuity or capital amount payable out of a superannuation fund or an approved deposit fund, as referred to in paragraph 160ZZJ(1)(a) ; or

(c) a right to, or to any part of, an asset of a superannuation fund or of an approved deposit fund, as referred to in paragraph 160ZZJ(1)(b) ; or

(d) a policy of life assurance as defined by subsection 160ZZI(1).

160ZZPL(2)   Assets in connected entity excluded.  

The assets of an entity for the purposes of this Division do not include shares, units or other interests (excluding an interest that is a security as defined by subsection 159GP(1) ) in another entity that is connected with the first-mentioned entity.

160ZZPL(3)   Meaning of active asset .  

Subject to subsections (4), (5) and (6), an asset owned by a taxpayer is an active asset at a particular time if at that time:

(a) it is used, or held ready for use, by the taxpayer in the course of carrying on a business; or

(b) it is an intangible asset that is inherently connected with a business carried on by a taxpayer (for example, goodwill or the benefit of a restrictive covenant).

160ZZPL(3A)   Subsection 157(3) to be disregarded.  

In determining for the purposes of this section whether a taxpayer is carrying on a business, subsection 157(3) is to be disregarded.

160ZZPL(4)   Certain assets not to be regarded as active assets.  

The following assets are not active assets:

(a) shares in companies;

(b) interests in trusts;

(c) subject to subsections (5) and (5A), an asset whose predominant use is to derive interest, an annuity, rent, royalties or foreign exchange gains;

(d) financial instruments (such as loans, debentures, bonds, promissory notes, futures contracts, forward contracts, currency swap contracts and a right or option in respect of a share, security, loan or contract).

160ZZPL(5)   Exception for intangible roll-over asset whose value has been enhanced by the taxpayer.  

A roll-over asset that is an intangible asset and whose predominant use is a use mentioned in paragraph (4)(c) is not precluded by that paragraph from being an active asset if it has been substantially developed, altered or improved by the taxpayer to such an extent that its market value has been substantially enhanced.

160ZZPL(5A)   Exception for replacement asset temporarily used to derive rent.  

A replacement asset is not precluded by paragraph (4)(c) from being an active asset merely because its predominant use is to derive rent if its use for that purpose is only temporary.

160ZZPL(6)   Asset deemed to be active asset for 2 years in certain circumstances.  

If:

(a) a taxpayer acquires an asset in a year of income for the purpose of having the asset as an active asset; and

(b) the taxpayer wishes to nominate the asset as a replacement asset for the purposes of the application of this Division in respect of a net roll-over amount; and

(c) a gross roll-over amount that applies to the taxpayer in respect of the year of income in which a roll-over asset was disposed of is taken into account in calculating the net roll-over amount; and

(d) the first-mentioned asset is an active asset at the end of 2 years after the last occasion in the year of income referred to in paragraph (c) on which the taxpayer disposed of any roll-over asset;

the first-mentioned asset is taken to have been an active asset at all times during that period of 2 years.

160ZZPL(7)   Meaning of roll-over asset .  

An asset of a business carried on by a taxpayer is a roll-over asset in respect of the taxpayer in respect of a year of income if:

(aa) the asset is not a share in a company or a unit in a unit trust; and

(a) the asset is disposed of by the taxpayer in the year of income; and

(b) the threshold criteria set out in section 160ZZPP are complied with at the disposal test time.

160ZZPL(8)   [When share is a roll-over asset]  

A share in a company is a roll-over asset in respect of a taxpayer who is an individual (other than an individual acting as a trustee) in respect of a year of income if:

(a) the company is, in respect of the year of income, a private company that is a resident; and

(b) the share is disposed of by the taxpayer in the year of income; and

(c) the taxpayer is the controlling individual of the company at the disposal test time; and

(d) the threshold criteria set out in section 160ZZPP are complied with at the disposal test time.

160ZZPL(9)   [When unit is roll-over asset]  

A unit in a unit trust is a roll-over asset in respect of a taxpayer who is an individual (other than an individual acting as a trustee) in respect of a year of income if:

(a) the unit trust is a resident unit trust, but is not a publicly traded unit trust, in respect of the year of income; and

(b) the unit is disposed of by the taxpayer in the year of income; and

(c) the taxpayer is the controlling individual of the trust at the disposal test time; and

(d) the threshold criteria set out in section 160ZZPP are complied with at the disposal test time.