ATO Interpretative Decision
ATO ID 2003/1026 (Withdrawn)
Income Tax
Capital gains tax: rollover relief - transfer of assets between Australian resident companies in same wholly-owned group during the period 1 July 2002 to 30 June 2003 - both companies members of separate consolidated groupsFOI status: may be released
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This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 rollover relief under Subdivision 126-B of the Income Tax Assessment Act 1997 (ITAA 1997) be chosen in relation to the transfer of an asset, prior to 1 July 2003, from an Australian resident company (the originating company) to another Australian resident company (the recipient company) that is a member of the same wholly-owned group of companies if the originating company and the recipient company were members of separate consolidated groups at the time of the transfer?
Decision
No. Rollover relief under Subdivision 126-B of the ITAA 1997 cannot be chosen. As a result of amendments made to subsection 126-50(5) of the ITAA 1997 by the New Business Tax System (Consolidation) Act (No. 1) 2002 (NBTS Act), rollover is no longer available in respect of asset transfers between Australian resident companies. Because the originating company became a member of a consolidated group prior to 1 July 2003, those amendments apply from the day on which the consolidated group was formed.
Facts
The taxpayer, an Australian resident company (the originating company) acquired a small shareholding in an Australian resident listed company in the 2001 income year.
The originating company is a member of a wholly-owned group of companies with a foreign resident company as its immediate parent company.
In May 2003, the taxpayer transferred the shares in the listed company to another Australian resident company (the recipient company) and made a capital gain. The recipient company is a member of the same wholly-owned group as the originating company and both companies have the same foreign resident company as their immediate parent company.
The originating company and the recipient company were head companies of separate consolidated groups at the time of the transfer. Both consolidated groups were formed with effect from 1 July 2002.
Both the originating company and the recipient company wish to choose to obtain rollover relief under Subdivision 126-B of the ITAA 1997 in relation to the transfer of the shares.
Reasons for Decision
Subdivision 126-B of the ITAA 1997 provides for a rollover in relation to certain transactions between two companies that are members of the same wholly-owned group of companies. There are a number of requirements that must be met for the rollover to be available.
Subsections 126-45(1) and 126-45(2) of the ITAA 1997 require that a CGT event of a specified type happen to the originating company as a result of the transaction. CGT event A1 is one of the CGT events listed in subsection 126-45(2). In this case, CGT event A1 happened on the transfer of the shares from the originating company to the recipient company.
The rollover requirements are set out in section 126-50 of the ITAA 1997. Those requirements were amended by the NBTS Act. As a result, rollover is no longer available under Subdivision 126-B in respect of asset transfers between Australian resident companies: subsection 126-50(5) of the ITAA 1997. More precisely, rollover is not available for CGT events that happen after 30 June 2003: subitem 23(1) of Schedule 3 to the NBTS Act.
Also, rollover may not be available for CGT events that happen before 1 July 2003 if, before that date, the originating company became a member of a consolidated group or multiple entry consolidated (MEC) group when the group was formed: subitem 23(2) of Schedule 3 to the NBTS Act. In that case, rollover is not available from the day on which the group was formed: subitem 23(3) of Schedule 3 to the NBTS Act.
In this case, the originating company and the recipient company were head companies of separate consolidated groups that were formed with effect from 1 July 2002. Therefore, as the CGT event happened in May 2003 when the shares were transferred, it is the requirements which exist in section 126-50 of the ITAA 1997 after the amendments that must be met. Under those requirements, rollover is not available in respect of asset transfers between Australian resident companies: subsection 126-50(5) of the ITAA 1997.
Accordingly, the originating company and the recipient company cannot choose to obtain rollover relief in relation to the transfer under Subdivision 126-B of the ITAA 1997. Consequently, the originating company cannot disregard the capital gain that arises from the transfer of the shares to the recipient company.
Date of decision: 5 November 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
Subdivision 126-B
subsection 126-45(1)
subsection 126-45(2)
section 126-50
subsection 126-50(5)
Schedule 3, subitem 23(1)
Schedule 3, subitem 23(2)
Schedule 3, subitem 23(3)
Keywords
capital gains
CGT assets
CGT companies in the same wholly owned group
CGT event A1-disposal of a CGT asset
CGT events
CGT same asset roll-over
consolidated group
consolidation - capital gains tax
consolidation - multiple entry consolidated group
ISSN: 1445-2782
| Date: | Version: | |
| 5 November 2003 | Original statement | |
| You are here | 26 February 2010 | Archived |