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ATO Interpretative Decision

ATO ID 2003/1051 (Withdrawn)

Income Tax

Capital gains tax: demergers - discretionary trusts choosing rollover
FOI status: may be released
  • This ATO ID is withdrawn from the database as it is a straight application of the law and does not contain an interpretative decision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.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the trustee of a discretionary trust choose a rollover under section 125-55 of the Income Tax Assessment Act 1997 (ITAA 1997) for a CGT event happening to the trust's original interests under a demerger which satisfies the conditions of Division 125 of the ITAA 1997?

Decision

Yes. The trustee of a discretionary trust can choose a rollover under section 125-55 of the ITAA 1997 for a CGT event happening to the trust's original interests under a demerger which satisfies the conditions of Division 125 of the ITAA 1997.

Facts

An Australian resident discretionary trust owned shares in a listed company.

The listed company undertook a demerger of its subsidiary which satisfied the conditions of Division 125 of the ITAA 1997.

This demerger caused a CGT event to happen to the trust's shares in the listed company.

Reasons for Decision

Subsection 125-65(2) of the ITAA 1997 prevents a discretionary trust from being a member of a demerger group, but that provision is not relevant as to whether the trust, as an owner of ownership interests in the head entity of the group, is entitled to choose a rollover under section 125-55 of the ITAA 1997.

An entity can choose a rollover under section 125-55 provided that it satisfies the conditions of that section. No condition of that section precludes any particular type of entity from choosing the rollover.

Date of decision:  13 November 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   Division 125
   section 125-55
   subsection 125-65(2)

Keywords
Capital gains tax
CGT roll-over relief
Demerger
Demerger roll-over
Discretionary trusts

Business Line:  Losses and CGT Centres of Expertise

Date of publication:  21 November 2003

ISSN: 1445-2782

history
  Date: Version:
  13 November 2003 Original statement
You are here 19 February 2010 Archived

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