ATO Interpretative Decision

ATO ID 2004/574 (Withdrawn)

Income Tax

• This ATO ID 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.

Issue

Is the taxpayer, an insurance multi-agent intermediary whose qualified licence had been cancelled when the taxpayer was granted an Australian financial services licence (AFS licence) under the financial services reform (FSR) regime, eligible for rollover relief under section 124-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The taxpayer is eligible for rollover relief under section 124-10 of the ITAA 1997, as modified by section 124-895 of the ITAA 1997, when the taxpayer was granted an AFS licence under the FSR regime.

Facts

The taxpayer is an insurance intermediary who has agency agreements with more than one insurer. The taxpayer acquired a qualified licence under section 1434 of the Corporations Act 2001.

The FSR regime came into effect on 11 March 2002. The taxpayer has a two year transition period ending on 10 March 2004 to apply for an AFS licence. The taxpayer applied to the Australian Securities & Investments Commission (ASIC) for the AFS licence during the transition period.

Subsequently, ASIC granted the AFS licence to the taxpayer. The taxpayer's qualified licence was cancelled when the AFS licence was granted.

Reasons for Decision

CGT event C2, section 104-25 of the ITAA 1997, happened when the taxpayer's qualified licence was cancelled when the AFS licence was granted.

Section 124-885 of the ITAA 1997 sets out the conditions to be satisfied for a taxpayer to be entitled to the rollover relief:

•

a taxpayer applies for an AFS licence during the transition period;

•

the taxpayer holds a qualified licence under section 1434 of the Corporations Act 2001;

•

the taxpayer is granted an AFS licence as a result of the application; and

•

the qualified licence ceases to have effect at the earlier of the date the AFS licence is granted, or 10 March 2004.

Where the conditions in section 124-885 of the ITAA 1997 are satisfied, the consequences in section 124-895 of the ITAA 1997 apply.

Subsection 124-895(1) of the ITAA 1997 provides that where:

•

the taxpayer's ownership of the original asset (the qualified licence) has come to an end; and

•

the taxpayer has acquired the replacement asset (the AFS licence),

the provisions of Subdivision 124-A of the ITAA 1997 apply, subject to modifications.

The outcomes for the taxpayer of applying the provisions of Subdivision 124-A and the modifications in section 124-895 of the ITAA 1997 are:

•

any capital gain or capital loss made from the CGT event C2 happening to the qualified licence is disregarded; and

•

the first element of the cost base of the AFS licence is the cost base of the qualified licence, plus any amount the taxpayer paid to get the AFS licence. The first element of the reduced cost base of the AFS licence is worked out similarly.

As the taxpayer has satisfied the conditions at section 124-885 of the ITAA 1997, the taxpayer is eligible for the same owner qualified licence rollover.

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   section 104-25
   Subdivision 124-A
   section 124-10
   section 124-885
   section 124-895
   subsection 124-895(1)

Related ATO Interpretative Decisions
ATO ID 2004/573
ATO ID 2004/575
ATO ID 2004/576
ATO ID 2004/577
ATO ID 2004/578

Keywords
Australian financial services licence
Capital gains tax
CGT events C1-C3 - end of a CGT asset
Financial services reform regime
Financial services reform transition period
Financial services reform transitions
FSR original asset
FSR regime
FSR replacement asset
FSR transition period
Qualified licence roll-over
Same owner roll-over

Business Line:  Losses and Capital Gains Tax Centre of Expertise

Date of publication:  16 July 2004

ISSN: 1445-2782