• Legal database
Legal database

ATO Interpretative Decision

ATO ID 2003/644 (Withdrawn)

Income Tax

Capital gains tax: trust to company rollover - CGT event J4 - company.
FOI status: may be released
  • This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Could a company make a capital gain or a capital loss if a trust obtains a rollover under Subdivision 124-N of the Income Tax Assessment Act 1997 (ITAA 1997) and CGT event J4, section 104-195 of the ITAA 1997, later happens because the trust did not cease to exist within the required six month period?

Decision

Yes. The company that has acquired the CGT assets under the rollover could make a capital gain or a capital loss from CGT event J4, section 104-195 of the ITAA 1997.

Facts

A fixed trust disposed of all of its CGT assets to a company and ceased to exist. The trust and the company both chose to obtain rollover under Subdivision 124-N of the ITAA 1997. The trust took more than six months to transfer all its CGT assets to the company. There were no circumstances beyond the trustee's control which caused the transfer of the trust's CGT assets to take more than six months.

Reasons for Decision

CGT event J4 happens where:

there is a rollover under Subdivision 124-N of the ITAA 1997 for a trust disposing of a CGT asset to a company under a trust restructure (paragraph 104-195(1)(a) of the ITAA 1997);
the trust fails to cease to exist within six months after the first asset is disposed of to the company or as soon as practicable after the end of that six month period (paragraph 104-195(1)(b) of the ITAA 1997); and
the company owns the asset when the failure happens (paragraph 104-195(1) (c) of the ITAA 1997).

As a result of the CGT event happening, the benefits of the rollover are negated and a capital gain or a capital loss may be made by the company for each of the assets referred to in paragraph 104-195(1)(c) of the ITAA 1997.

[Note: CGT event J4 can also happen to a shareholder in the company.]

Date of decision:  15 July 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 124-N
   section 104-195
   paragraph 104-195(1)(a)
   paragraph 104-195(1)(b)
   paragraph 104-195(1)(c)

Related ATO Interpretative Decisions
ATO ID 2003/645
ATO ID 2003/646
ATO ID 2003/647

Keywords
Capital gains
Capital gains tax
CGT assets
CGT choice
CGT events
CGT roll-over relief
Trust assets
Unit trusts

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  25 July 2003

ISSN: 1445-2782

history
  Date: Version:
  15 July 2003 Original statement
You are here 21 September 2007 Archived

Back to top