ATO Interpretative Decision
ATO ID 2003/337 (Withdrawn)
Income Tax
Capital gains tax: trust to company rollover - exchange of units for sharesFOI status: may be released
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ATO ID 2003/337 is withdrawn as it is based on a straightforward application of the law and has no interpretive value.This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
If, as part of the restructure of a unit trust, the taxpayer, a unit holder of that trust, transfers all of their units to a company and the company issues shares as consideration, is this an 'exchange' for the purpose of paragraph 124-870(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The transfer of units in a unit trust to a company and the issue of shares by the company as consideration is an 'exchange' for the purpose of paragraph 124-870(1)(b) of the ITAA 1997.
Facts
The taxpayer owns units in a unit trust (the trust). The trust restructures by disposing of all its CGT assets to an Australian resident company limited by shares (the company). The taxpayer transfers all of their units in the trust to the company. The company issues shares as consideration for the units in the trust.
Reasons for Decision
Subsection 124-870(1) of the ITAA 1997 states:
You may choose to obtain a rollover if:
The word 'exchange', which is used in paragraph 124-870(1)(b) of the ITAA 1997, is not specifically defined for income tax purposes in either the Income Tax Assessment Act 1936 or the ITAA 1997. Therefore the ordinary meaning of the word is used.
The Australian Oxford Dictionary, 1999, University Press, Melbourne, defines 'exchange' as:
The Macquarie Dictionary, 2002, revised 3rd edition, The Macquarie Library Pty Ltd, Sydney, defines 'exchange' as:
to part with for some equivalent, giving up (something) for something else
Therefore 'exchange' in paragraph 124-870(1)(b) of the ITAA 1997 means giving up units or interests in the restructuring trust and receiving shares in the company, to which the trust's assets were transferred, in its place. This includes the transfer of units in a unit trust to the company to which the unit trust is transferring all its CGT assets (under a Subdivision 124-N of the ITAA 1997 trust restructure) and the acquisition of shares in that company as consideration.
Date of decision: 7 April 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
Subdivision 124-N
subsection 124-870(1)
paragraph 124-870(1)(b)
Other References:
Australian Oxford Dictionary, 1999, University Press, Melbourne.
Macquarie Dictionary, 2002, revised 3rd edition, The Macquarie Library Pty Ltd, Sydney.
Keywords
Acquisition of shares
Capital gains tax
CGT event A1-disposal of a CGT asset
CGT events C1-C3 - end of a CGT asset
CGT replacement asset roll-over
Disposal of unit trust units
Exchange of unit trust units
Unit trust restructuring
Unitholders
ISSN: 1445-2782
| Date: | Version: | |
| 7 April 2003 | Original statement | |
| You are here | 2 May 2014 | Archived |