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Legal database

ATO Interpretative Decision

ATO ID 2003/633 (Withdrawn)

Income Tax

Capital gains tax: demergers - assets which cannot be demerged
FOI status: may be released
  • This ATO ID is withdrawn as it is a straight application of the law and it does not contain an interpretative decision.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 transfer of assets which are not ownership interests in an entity constitute a demerger for the purposes of Division 125 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The transfer of assets which are not ownership interests in an entity cannot constitute a demerger for the purposes of Division 125 of the ITAA 1997.

Facts

A company transferred business assets (which were not ownership interests in another entity) to its shareholders.

Reasons for Decision

The transfer of assets which are not ownership interests in an entity cannot satisfy the conditions for a demerger in Division 125 of the ITAA 1997. Section 125-70 of the ITAA 1997 requires, inter alia, that the owners of ownership interests in the head entity of a demerger group receive ownership interests in a demerged entity under the demerger.

[Note: A transfer of ownership interests in an entity is not necessarily a demerger for the purposes of Division 125. There are a number of other conditions which must be satisfied.]

Date of decision:  17 July 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   Division 125
   section 125-70

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

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  25 July 2003

ISSN: 1445-2782

history
  Date: Version:
  17 July 2003 Original statement
You are here 19 March 2010 Archived

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