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ATO Interpretative Decision

ATO ID 2004/680 (Withdrawn)

Income tax

Capital gains tax: Financial services reform regime - old licence rollover - same owner - rollover not chosen
FOI status: may be released
  • 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.

Status of this decision: Decision Withdrawn 26 August 2005
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 taxpayer, a financial service provider whose old licence had ceased to have effect and been replaced with the Australian financial service licence (AFS licence) when the taxpayer moved to the financial services reform (FSR) regime, not choose the rollover relief under section 124-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The rollover relief under section 124-10 of the ITAA 1997 automatically applied when the taxpayer moved to the FSR regime and their old licence ceased to have effect and was replaced with the AFS licence.

Facts

The taxpayer owned an old licence that was issued under the relevant law in force before the commencement of the Financial Services Reform Act 2001. Subsequently, the taxpayer became a regulated principal under section 1430 of the Corporations Act 2001.

The taxpayer's old licence ceased to have effect when the AFS licence was granted. The AFS licence covered all of the activities that were authorised by the old licence.

The taxpayer satisfied the conditions in section 124-880 of the ITAA 1997 for the same owner old licence rollover.

Reasons for Decision

CGT event C2, section 104-25 of the ITAA 1997, happened when the taxpayer's old licence ceased to have effect when the AFS licence was granted.

The rollover consequences in section 124-895 of the ITAA 1997 automatically applied when the taxpayer satisfied the conditions in section 124-880 of the ITAA 1997. Subdivision 124-O of the ITAA 1997 does not allow the taxpayer to choose that the rollover does not apply.

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

•
the capital loss or capital loss made from CGT event C2 happening to the old licence is disregarded
•
if the old licence was acquired before 20 September 1985, the AFS licence is taken to be have been acquired before 20 September 1985
•
if the old licence was acquired on or after 20 September 1985, the first element of the reduced cost base of the AFS licence is the cost base of the old licence plus any amount the taxpayer paid to get the AFS licence.

As the taxpayer has satisfied the conditions of section 124-880 of the ITAA 1997, the same owner old licence rollover automatically applied.

Note: Subdivision 124-O of the ITAA 1997 provides six automatic CGT rollovers for financial services providers on transition to the FSR regime:

Three same owner rollovers

•
old licence rollover - section 124-880 of the ITAA 1997
•
qualified licence rollover - section 124-885 of the ITAA 1997
•
rights rollover - section 124-890 of the ITAA 1997.

Three new owner rollovers

•
old licence rollover - section 124-900 of the ITAA 1997
•
qualified licence rollover - section 124-905 of the ITAA 1997
•
rights rollover - section 124-910 of the ITAA 1997.

Date of decision:  2 August 2004

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   section 104-25
   Subdivision 124-A
   section 124-10
   Subdivision 124-O
   section 124-880
   section 124-885
   section 124-890
   section 124-900
   section 124-905
   section 124-910

Corporations Act 2001
   section 1430

Financial Services Reform Act 2001
   Table of Content

Related ATO Interpretative Decisions
ATO ID 2004/573
ATO ID 2004/574
ATO ID 2004/575
ATO ID 2004/576
ATO ID 2004/577
ATO ID 2004/578

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

Business Line:  Losses and Capital Gains Tax Centre of Expertise

Date of publication:  13 August 2004

ISSN: 1445-2782

history
  Date: Version:
  2 August 2004 Original statement
You are here → 26 August 2005 Archived

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