Tax Law Improvement Act (No. 1) 1998 (46 of 1998)

Schedule 1   Amendment of the Income Tax Assessment Act 1997

1   Part 3-3 Division 122

Division 122 - Roll-over for the disposal of assets to, or the creation of assets in, a wholly-owned company

Table of Subdivisions

Guide to Division 122

122-A Disposal or creation of assets by individual to a wholly-owned company

122-B Disposal or creation of assets by partners to a wholly-owned company

Guide to Division 122

122-1 What this Division is about

A roll-over can delay the making of a capital gain or loss if:

• you dispose of a CGT asset, or all the assets of a business, to a company in which you own all the shares; or

• you create a CGT asset in such a company; or

• all the partners in a partnership dispose of partnership property to a company in which they own all the shares; or

• the partners create a CGT asset in such a company.

Subdivision 122-A - Disposal or creation of assets by individual to a wholly-owned company

Guide to Subdivision 122-A

122-5 What this Subdivision is about

This Subdivision sets out when you can obtain a roll-over if you transfer a CGT asset, or all the assets of a business, to a company. It also deals with the creation of a CGT asset in a company. There are consequences for the company also.

Table of sections

When is a roll-over available

122-15 Disposal or creation of assets - wholly-owned company

122-20 What you receive for the trigger event

122-25 Other requirements to be satisfied

122-35 What if the company undertakes to discharge a liability (disposal case)

122-37 Rules for working out what a liability in respect of an asset is

Replacement-asset roll-over if you dispose of a CGT asset

122-40 Disposal of a CGT asset

Replacement-asset roll-over if you dispose of all the assets of a business

122-45 Disposal of all the assets of a business

122-50 All assets acquired on or after 20 September 1985

122-55 All assets acquired before 20 September 1985

122-60 Assets acquired before and after 20 September 1985

Replacement-asset roll-over for a creation case

122-65 Creation of asset

Same-asset roll-over consequences for the company (disposal case)

122-70 Consequences for the company (disposal case)

Same-asset roll-over consequences for the company (creation case)

122-75 Consequences for the company (creation case)

[This is the end of the Guide.]

When is a roll-over available

122-15 Disposal or creation of assets - wholly-owned company

If you are an individual or a trustee, you can choose to obtain a roll-over if one of the *CGT events (the trigger event ) specified in this table happens involving you and a company in the circumstances set out in sections 122-20 to 122-35.

Note 1: The roll-over starts at section 122-40.

Note 2: Section 103-25 tells you when you have to make the choice.

Example: Gavin runs a plumbing business. He wants to incorporate it so he disposes of all its assets to a company. He becomes the sole shareholder of the company.

122-20 What you receive for the trigger event

(1) The consideration you receive for the trigger event happening must be only:

(a) *shares in the company; or

(b) for a *disposal of a *CGT asset, or all the assets of a business, to the company (a disposal case ) - shares in the company and the company undertaking to discharge one or more liabilities in respect of the asset or assets of the *business (as appropriate).

Note: There are rules for working out what are the liabilities in respect of an asset: see section 122-37.

(2) The *shares cannot be *redeemable shares.

(3) The market value of the *shares you receive for the trigger event happening must be substantially the same as:

(a) for a disposal case - the market value of the asset or assets you disposed of, less any liabilities the company undertakes to discharge in respect of the asset or assets (as appropriate); or

(b) for another trigger event (a creation case ) - the market value of the CGT asset created in the company (the created asset ).

(4) In working out if the requirement in paragraph (3)(a) is satisfied, if the market value of the *shares is different to what it would otherwise be only because of the possibility of liabilities attaching to the asset or assets, disregard the difference.

Note: The company may have to pay income tax if an amount is included in its assessable income because of a CGT event happening to an asset you disposed of, or it may have a liability because of accrued leave entitlements of employees. The market value of the shares will reflect these contingent liabilities.

122-25 Other requirements to be satisfied

(1) You must own all the *shares in the company just after the time of the trigger event.

Note: You must own the shares in the same capacity as you owned or created the assets that the company now owns.

(2) This Subdivision does not apply to the *disposal or creation of any of the assets specified in this table:

(3) A precluded asset is:

(a) a *car, motorcycle or similar vehicle; or

(b) *trading stock; or

(c) an interest in the copyright in a film referred to in section 118-30; or

(d) a right to mine in a particular area in Australia referred to in section 118-45.

(4) If:

(a) the *CGT asset or any of the assets of the *business is a right, option or *convertible note; and

(b) the company *acquires another CGT asset by exercising the right or option or by converting the convertible note;

the other asset cannot become *trading stock of the company just after the company acquired it.

(5) The *ordinary income and *statutory income of the company must not be exempt from income tax because of Division 50 for the income year of the trigger event.

(6) If you are an individual, the requirements in one of the items in this table must be satisfied:

(7) If you are a trustee of a trust, the requirements in one of the items in this table must be satisfied:

122-35 What if the company undertakes to discharge a liability (disposal case)

Disposal of a CGT asset

(1) One of the requirements in this table must be satisfied if:

(a) you *dispose of a *CGT asset; and

(b) the company undertakes to discharge one or more liabilities in respect of it.

(The market value, or the *cost base, of an asset is worked out when you disposed of it.)

Note: There are rules for working out what are the liabilities in respect of an asset: see section 122-37.

Disposal of all the assets of a business

(2) One of the requirements in this table must be satisfied if:

(a) you *dispose of all the assets of a *business; and

(b) the company undertakes to discharge one or more liabilities in respect of the assets of the business.

(The market value, or the *cost base, of an asset is worked out when you disposed of it.)

122-37 Rules for working out what a liability in respect of an asset is

(1) These rules are relevant to working out what are the liabilities in respect of an asset.

(2) A liability incurred for the purposes of a *business that is not a liability in respect of a specific asset or assets of the business is taken to be a liability in respect of all the assets of the business.

Note: An example is a bank overdraft.

(3) If a liability is in respect of 2 or more assets, the proportion of the liability that is in respect of any one of those assets is equal to:

The market value of the asset / The total of the market values of all the assets that the liability is in respect of

Replacement-asset roll-over if you dispose of a CGT asset

122-40 Disposal of a CGT asset

(1) If you choose a roll-over, a *capital gain or *capital loss you make from the trigger event is disregarded.

(2) If you *acquired the asset on or after 20 September 1985:

(a) the first element of each *share's *cost base is the asset's cost base when you *disposed of it (less any liabilities the company undertakes to discharge in respect of it) divided by the number of shares; and

(b) the first element of each share's *reduced cost base is worked out similarly.

Note 1: There are rules for working out what are the liabilities in respect of an asset: see section 122-37.

Note 2: There are special indexation rules for roll-overs: see Division 114.

(3) If you *acquired the asset before 20 September 1985, you are taken to have acquired the *shares before that day.

Replacement-asset roll-over if you dispose of all the assets of a business

122-45 Disposal of all the assets of a business

(1) If you choose a roll-over for *disposing of all the assets of a *business to the company, a *capital gain or *capital loss you make from each of the assets of the business is disregarded.

(2) The other consequences relate to the *shares you receive and depend on when you *acquired the assets of the *business.

Note 1: There are 3 possible cases:

· you acquired all the assets on or after 20 September 1985: see section 122-50;

· you acquired all the assets before that day: see section 122-55;

· you acquired some of the assets on or after that day: see section 122-60.

Note 2: There are special indexation rules for roll-overs: see Division 114.

Note 3: There are other consequences for you and the company if you dispose of trading stock: see Division 70.

122-50 All assets acquired on or after 20 September 1985

(1) If you *acquired all of the assets of the *business on or after 20 September 1985:

(a) the first element of each *share's *cost base is the sum of the market values of the *precluded assets and the cost bases of the other assets (less any liabilities the company undertakes to discharge in respect of all of those assets) divided by the number of shares; and

(b) the first element of each share's *reduced cost base is worked out similarly.

Note 1: There are rules for working out what are the liabilities in respect of an asset: see section 122-37.

Note 2: There are special indexation rules for roll-overs: see Division 114.

Example: Nick is a small trader. He wants to incorporate his business. He disposes of all its assets to a company and receives 10 shares in return.

Nick acquired all the assets of the business after 20 September 1985. The market value of the items of his trading stock when he disposed of them is $20,000. Trading stock is a precluded asset.

The cost bases of the other assets when he disposed of them are:

· plant and equipment: $50,000;

· buildings: $120,000;

· office furniture: $10,000.

Nick has a business overdraft of $15,000. It is taken to be a liability in respect of all the assets of his business.

The first element of the cost base of the 10 shares is:

$20,000 + $50,000 + $120,000 + $10,000 - $15,000 = $185,000

The first element of the reduced cost base of the 10 shares is worked out similarly.

(2) The market value of an asset is worked out when you *disposed of it. The *cost base or *reduced cost base of an asset is worked out at the same time.

122-55 All assets acquired before 20 September 1985

(1) You are taken to have *acquired all of the *shares before 20 September 1985 if you acquired all the assets of the *business before that day and none of the assets is a *precluded asset.

(2) However, if at least one of the assets is a *precluded asset, you are taken to have *acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

• the total of the market values of the assets that are not *precluded assets, less any liabilities the company undertakes to discharge in respect of those assets;

expressed as a percentage of:

• the total of the market values of all the assets, less any liabilities the company undertakes to discharge in respect of those assets.

Note: There are rules for working out what are the liabilities in respect of an asset: see section 122-37.

(3) The first element of each other *share's *cost base and *reduced cost base is the total of the market values of the *precluded assets (less any liabilities the company undertakes to discharge in respect of those assets) divided by the number of those other shares.

(4) The market value of an asset is worked out when you *disposed of it. The *cost base or *reduced cost base of an asset is worked out at the same time.

122-60 Assets acquired before and after 20 September 1985

(1) If you *acquired some of the assets on or after 20 September 1985, you are taken to have acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

• the total of the market values of the assets (except any *precluded assets) that you acquired before that day, less any liabilities the company undertakes to discharge in respect of those assets;

expressed as a percentage of:

• the total of the market values of all the assets, less any liabilities the company undertakes to discharge in respect of those assets.

(2) The first element of each other *share's *cost base is the sum of the market values of the *precluded assets and the cost bases of the other assets that you *acquired on or after that day (less any liabilities the company undertakes to discharge in respect of all of those assets) divided by the number of those other shares.

Note: There are special indexation rules for roll-overs: see Division 114.

(3) The first element of each other *share's *reduced cost base is worked out similarly.

(4) The market value of an asset is worked out when you *disposed of it. The *cost base or *reduced cost base of an asset is worked out at the same time.

Replacement-asset roll-over for a creation case

122-65 Creation of asset

(1) If you choose a roll-over, a *capital gain or *capital loss you make from the trigger event is disregarded.

(2) The first element of each *share's *cost base is the amount applicable under this table divided by the number of shares. The first element of each share's *reduced cost base is worked out similarly.

The expenditure can include a transfer of property: see section 103-5.

Example: Bill grants a licence (CGT event D1) to Tiffin Pty Ltd (a company he owns). The company issues him with 2 additional shares. He incurs legal expenses of $1,000 to grant the licence.

Bill's cost base for each of the shares is $500.

Same-asset roll-over consequences for the company (disposal case)

122-70 Consequences for the company (disposal case)

(1) There are these consequences for the company in a disposal case if you choose to obtain a roll-over. They are relevant for each *CGT asset (except a *precluded asset) that you *disposed of to the company.

Note: A capital gain or loss from a precluded asset can be disregarded: see Subdivision 118-A.

Asset acquired on or after 20 September 1985

(2) If you *acquired the asset on or after 20 September 1985:

(a) the first element of the asset's *cost base (in the hands of the company) is the asset's cost base when you disposed of it; and

(b) the first element of the asset's *reduced cost base (in the hands of the company) is the asset's reduced cost base when you disposed of it.

Note: There are special indexation rules for roll-overs: see Division 114.

Asset acquired before 20 September 1985

(3) If you *acquired the asset before 20 September 1985, the company is taken to have acquired it before that day.

Note: A capital gain or loss from a CGT asset acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.

Same-asset roll-over consequences for the company (creation case)

122-75 Consequences for the company (creation case)

(1) There are these consequences for the company in a creation case if you choose to obtain a roll-over.

(2) The first element of the created asset's *cost base (in the hands of the company) is the applicable amount from the table in subsection 122-65(2).

Example: To continue the example in section 122-65, the cost base of the licence in Tiffin Pty Ltd's hands is $1,000.

(3) The first element of the created asset's *reduced cost base (in the hands of the company) is worked out similarly.

Subdivision 122-B - Disposal or creation of assets by partners to a wholly-owned company

Guide to Subdivision 122-B

122-120 What this Subdivision is about

This Subdivision sets out when the partners in a partnership can obtain a roll-over on transferring a CGT asset, or all the assets of a business, to a company. It also deals with the creation of a CGT asset in a company. There are consequences for the company also.

Table of sections

When is a roll-over available

122-125 Disposal or creation of assets - wholly-owned company

122-130 What the partners receive for the trigger event

122-135 Other requirements to be satisfied

122-140 What if the company undertakes to discharge a liability (disposal case)

122-145 Rules for working out what a liability in respect of an interest in an asset is

Replacement-asset roll-over if partners dispose of a CGT asset

122-150 Capital gain or loss disregarded

122-155 Disposal of post-CGT or pre-CGT interests

122-160 Disposal of both post-CGT and pre-CGT interests

Replacement-asset roll-over if the partners dispose of all the assets of a business

122-170 Capital gain or loss disregarded

122-175 Other consequences

122-180 All interests acquired on or after 20 September 1985

122-185 All interests acquired before 20 September 1985

122-190 Interests acquired before and after 20 September 1985

Replacement-asset roll-over for a creation case

122-195 Creation of asset

Same-asset roll-over consequences for the company (disposal case)

122-200 Consequences for the company (disposal case)

Same-asset roll-over consequences for the company (creation case)

122-205 Consequences for the company (creation case)

[This is the end of the Guide.]

When is a roll-over available

122-125 Disposal or creation of assets - wholly-owned company

All of the partners in a partnership can choose to obtain a roll-over if one of the *CGT events (the trigger event ) specified in this table happens involving the partners and a company in the circumstances set out in sections 122-130 to 122-140.

Note 1: The roll-over starts at section 122-150.

Note 2: Section 103-25 tells you when you have to make the choice.

Example: Michael and Sandra operate a fish shop in partnership. They agree to incorporate the business so they dispose of their interests in all its assets to a company. They are the only shareholders of the company.

122-130 What the partners receive for the trigger event

(1) The consideration the partners receive must be only:

(a) *shares in the company; or

(b) for a *disposal of their interests in a *CGT asset, or in all the assets of a business, to the company (a disposal case ) - shares in the company and the company undertaking to discharge one or more liabilities in respect of their interests.

Note: There are rules for working out what are the liabilities in respect of an interest in an asset: see section 122-145.

(2) The *shares cannot be *redeemable shares.

(3) The market value of the *shares each partner receives for the trigger event happening must be substantially the same as:

(a) for a disposal case - the market value of the interests in the asset or assets the partner disposed of, less any liabilities the company undertakes to discharge in respect of the interests in the asset or assets (as appropriate); or

(b) for another trigger event (a creation case ) - the market value of what would have been the partner's interest in the *CGT asset created in the company (the created asset ) if it were an asset of the partnership.

(4) In working out if the requirement in paragraph (3)(a) is satisfied, if the market value of the *shares is different to what it would otherwise be only because of the possibility of liabilities attaching to the asset or assets, disregard the difference.

Note: The company may have to pay income tax if an amount is included in its assessable income because of a CGT event happening to an asset a partner disposed of, or it may have a liability because of accrued leave entitlements of employees. The market value of the shares will reflect these contingent liabilities.

122-135 Other requirements to be satisfied

(1) The partners must own all the *shares in the company just after the time of the trigger event.

(2) Each partner must own the *shares the partner received for the trigger event happening in the same capacity that the partner:

(a) owned the partner's interests in the assets that the company now owns; or

(b) participated in the creation of the asset in the company.

Note: If a partner's interests were owned as trustee, the partner must receive shares as trustee.

(3) This Subdivision does not apply to the *disposal or creation of any of the assets specified in this table:

(4) If:

(a) the *CGT asset or any of the assets of the *business is a right, option or *convertible note; and

(b) the company *acquires another CGT asset by exercising the right or option or by converting the convertible note;

the other asset cannot become *trading stock of the company just after the company acquired it.

(5) The *ordinary income and *statutory income of the company must not be exempt from income tax because of Division 50 for the income year of the trigger event.

(6) For a partner who is not a trustee of a trust, the requirements in one of the items in this table must be satisfied:

(7) For a partner who is a trustee of a trust, the requirements in one of the items in this table must be satisfied:

122-140 What if the company undertakes to discharge a liability (disposal case)

Disposal of a CGT asset

(1) One of these requirements must be satisfied (for each partner) if:

(a) the partners *dispose of their interests in a *CGT asset; and

(b) the company undertakes to discharge one or more liabilities in respect of the interests in the asset.

(The market value, or the *cost base, of an interest is worked out at the time of the disposal.)

Note: There are rules for working out what are the liabilities in respect of an interest in an asset: see section 122-45.

Disposal of all the assets of a business

(2) One of these requirements must be satisfied (for each partner) if:

(a) the partners *dispose of their interests in all the assets of a *business; and

(b) the company undertakes to discharge one or more liabilities in respect of the interests in the assets.

(The market value, or the *cost base, of an interest is worked out at the time of the disposal.)

122-145 Rules for working out what a liability in respect of an interest in an asset is

(1) These rules are relevant to working out what are the liabilities in respect of a partner's interests in an asset.

(2) A liability incurred for the purposes of a *business that is not a liability in respect of interests in a specific asset or assets of the business is taken to be a liability in respect of the partner's interests in all the assets of the business.

Note: An example is a bank overdraft.

(3) If a liability is in respect of both:

(a) the partner's interests in one or more assets that the partner *acquired on or after 20 September 1985; and

(b) the partner's interests in one or more assets that the partner acquired before that day;

the proportion of the liability that is in respect of the partner's interests that the partner acquired on or after that day is equal to:

The market value of the partner's interest that the partner acquired on or after that day / The total of the market values of all the partner's interest in assets that the liability is in respect of

Replacement-asset roll-over if partners dispose of a CGT asset

122-150 Capital gain or loss disregarded

If the partners choose a roll-over for *disposing of their interests in a CGT asset to the company, a *capital gain or *capital loss any partner makes from the disposal is disregarded.

122-155 Disposal of post-CGT or pre-CGT interests

(1) If a partner *acquired all the partner's interests in the asset on or after 20 September 1985:

(a) the first element of each *share's *cost base is the sum of the cost bases of the interests when the partner *disposed of them (less any liabilities the company undertakes to discharge in respect of them) divided by the number of the partner's shares; and

(b) the first element of each share's *reduced cost base is worked out similarly.

Note 1: There are rules for working out what are the liabilities in respect of an interest in an asset: see section 122-145.

Note 2: There are special indexation rules for roll-overs: see Division 114.

(2) If a partner *acquired all the partner's interests in the asset before 20 September 1985, the partner is taken to have acquired the *shares before that day.

122-160 Disposal of both post-CGT and pre-CGT interests

(1) If a partner *acquired some of the partner's interests in the asset on or after 20 September 1985 and some before that day, the partner is taken to have acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares the partner acquires) does not exceed:

• the market value of the interests in the asset that the partner acquired before that day;

expressed as a percentage of:

• the total of the market values of all the partner's interests in the asset.

(2) The first element of each other *share's *cost base is the sum of the cost bases of the partner's interests that the partner *acquired on or after that day (less any liabilities the company undertakes to discharge in respect of all of those interests) divided by the number of the other shares.

Note: There are special indexation rules for roll-overs: see Division 114.

(3) The first element of each other *share's *reduced cost base is worked out similarly.

(4) The market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest in an asset is worked out at the same time.

Replacement-asset roll-over if the partners dispose of all the assets of a business

122-170 Capital gain or loss disregarded

If the partners choose a roll-over for *disposing of their interests in all the assets of a *business to the company, a *capital gain or *capital loss any partner makes from the disposal is disregarded.

122-175 Other consequences

The other consequences relate to the *shares the partners receive and depend on when they *acquired their interests in the assets of the *business.

Note 1: There are 3 possible cases:

· a partner acquired all the interests on or after 20 September 1985: see section 122-180;

· a partner acquired all the interests before that day: see section 122-185;

· a partner acquired some of the interests on or after that day: see section 122-190.

Note 2: There are other consequences for the partnership and the company if the partners dispose of their interests in trading stock of the partnership: see Division 70.

122-180 All interests acquired on or after 20 September 1985

(1) If a partner *acquired all of the partner's interests in the assets of the *business on or after 20 September 1985:

(a) the first element of the partner's *cost base of each *share is the sum of the market values of the partner's interests in the *precluded assets and the cost bases of the partner's interests in the other assets (less any liabilities the company undertakes to discharge in respect of all of those interests) divided by the number of the partner's shares; and

(b) the first element of the partner's *reduced cost base of each *share is worked out similarly.

Note 1: There are rules for working out what are the liabilities in respect of interests: see section 122-145.

Note 2: There are special indexation rules for roll-overs: see Division 114.

(2) The market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest is worked out at the same time.

122-185 All interests acquired before 20 September 1985

(1) A partner is taken to have *acquired all of the *shares before 20 September 1985 if the partner acquired all the partner's interests in the assets of the *business before that day and none of the assets is a *precluded asset.

(2) However, if at least one of the assets is a *precluded asset, the partner is taken to have *acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

• the total of the market values of the partner's interests in the assets that are not *precluded assets, less any liabilities the company undertakes to discharge in respect of those interests;

expressed as a percentage of:

• the total of the market values of the partner's interests in all the assets, less any liabilities the company undertakes to discharge in respect of those interests.

Note: There are rules for working out what are the liabilities in respect of an interest: see section 122-145.

(3) The first element of the partner's *cost base and *reduced cost base of each other *share is the total of the market values of the partner's interests in the *precluded assets (less any liabilities the company undertakes to discharge in respect of those interests) divided by the number of the other shares.

(4) The market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest is worked out at the same time.

122-190 Interests acquired before and after 20 September 1985

(1) If a partner *acquired some of the interests in the assets on or after 20 September 1985, the partner is taken to have acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

• the total of the market values of the partner's interests in the assets (except any *precluded assets) that the partner acquired before that day, less any liabilities the company undertakes to discharge in respect of those interests;

expressed as a percentage of:

• the total of the market values of all the partner's interests in the assets, less any liabilities the company undertakes to discharge in respect of those interests.

(2) The first element of the partner's *cost base of each other *share is the sum of the market values of the partner's interests in the *precluded assets and the cost bases of the partner's interests in the other assets that the partner *acquired on or after that day (less any liabilities the company undertakes to discharge in respect of all of those interests) divided by the number of the other shares.

Note: There are special indexation rules for roll-overs: see Division 114.

(3) The first element of the partner's *reduced cost base of each other *share is worked out similarly.

(4) The market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest in an asset is worked out at the same time.

Replacement-asset roll-over for a creation case

122-195 Creation of asset

(1) If the partners choose a roll-over, a *capital gain or *capital loss any partner makes from the trigger event is disregarded.

(2) The first element of the partner's *cost base of each *share is the amount applicable under this table divided by the number of shares. The first element of each share's *reduced cost base is worked out similarly.

The expenditure can include a transfer of property: see section 103-5.

Same-asset roll-over consequences for the company (disposal case)

122-200 Consequences for the company (disposal case)

(1) There are these consequences for the company in a disposal case if the partners choose to obtain a roll-over. They are relevant for interests in each *CGT asset (except a *precluded asset) that the partners *disposed of to the company.

Note: A capital gain or loss from a precluded asset can be disregarded: see Subdivision 118-A.

Interests acquired on or after 20 September 1985

(2) If all of the partners' interests in an asset were *acquired on or after 20 September 1985:

(a) the first element of the asset's *cost base (in the hands of the company) is the sum of the cost bases of the partners' interests in the asset when it was disposed of; and

(b) the first element of the asset's *reduced cost base (in the hands of the company) is the sum of the reduced cost bases of the partners' interests in the asset when it was disposed of.

Note: There are special indexation rules for roll-overs: see Division 114.

Interests acquired before 20 September 1985

(3) If all of the partners' interests in an asset were *acquired before 20 September 1985, the company is taken to have acquired it before that day.

Note: A capital gain or loss from a CGT asset acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.

Interests acquired on or after and before 20 September 1985

(4) If some of the partners' interests in an asset (the original asset ) were *acquired on or after 20 September 1985 and some before that day, the company is taken to have acquired 2 separate *CGT assets:

(a) one (which the company is taken to have acquired on or after 20 September 1985) representing the extent to which the partners' interests in the original asset were acquired by the partners on or after that day; and

(b) another (which the company is taken to have acquired before that day) representing the extent to which the partners' interests in the original asset were acquired by the partners before that day.

(5) The first element of the *cost base of the separate asset that the company is taken to have *acquired on or after 20 September 1985 is the sum of the cost bases of the partners' interests in the original asset that they acquired on or after that day.

Note: There are special indexation rules for roll-overs: see Division 114.

(6) The first element of its *reduced cost base is worked out similarly.

Same-asset roll-over consequences for the company (creation case)

122-205 Consequences for the company (creation case)

(1) There are these consequences for the company in a creation case if the partners choose to obtain a roll-over.

(2) The first element of the created asset's *cost base (in the hands of the company) is the applicable amount from this table.

The expenditure can include a transfer of property: see section 103-5.

(3) The first element of the created asset's *reduced cost base (in the hands of the company) is worked out similarly.

[The next Division is Division 124.]