New Business Tax System (Integrity and Other Measures) Act 1999 (Incorporating amendments up to Act No. 78 of 2001) (169 of 1999)
Schedule 4 Transfers of assets within company groups
Income Tax Assessment Act 1997
15 At the end of Division 170
Add:
Subdivision 170-D - Transactions by a company that is a member of a linked group
Guide to Subdivision 170-D
170-250 What this Subdivision is about
This Subdivision provides that there is a deferral of a *capital loss or deduction if a company (the originating company ) that is a member of a *linked group disposes of a *CGT asset to, or creates a CGT asset in, another entity that:
(a) is a company that is also a member of the linked group; or
(b) is a connected entity of the originating company or an *associate of such a connected entity;
and the disposal or creation of the asset would have resulted in the originating company making a capital loss or becoming entitled to a deduction.
Table of sections
Operative provisions
170-255 Application of Subdivision
170-260 Linked group
170-265 Connected entity
170-270 Immediate consequences for originating company
170-275 Subsequent consequences for originating company
170-280 What happens if the asset is acquired by an entity of a particular kind within 4 years
[This is the end of the Guide.]
Operative provisions
170-255 Application of Subdivision
(1) This Subdivision applies if:
(a) an event (the deferral event ) happens involving a company (the originating company ) and another entity; and
(b) one or more of the following apply:
(i) the deferral event is a *CGT event that would have resulted in the originating company making a *capital loss (except a capital loss that would be disregarded under a provision of this Act other than this Subdivision);
(ii) the deferral event would have resulted in the originating company becoming entitled to a deduction in respect of the disposal of a CGT asset;
(iii) if the originating company is a partner in a partnership - the deferral event would have resulted in the partnership becoming entitled to a deduction in respect of the disposal of a CGT asset; and
(c) if subparagraph (b)(i) applies - the CGT event is one of the following:
(i) CGT events A1 and B1 (a disposal case );
(ii) CGT events D1, D2, D3 and F1 (a creation case ); and
Note: The full list of CGT events is in section 104-5.
(d) one of the following applies:
(i) the originating company is a resident at the time of the deferral event;
(ii) if the deferral event is a CGT event D1 - one of the items in the table in subsection 136-15(1) is satisfied;
(iii) if the deferral event is a CGT event A1, B1 or F1 - the asset or the subject of the lease, as the case may be, had the *necessary connection with Australia immediately before the deferral event;
(iv) if the deferral event is a CGT event D2 - the option had the *necessary connection with Australia immediately after the deferral event; and
(e) at the time of the deferral event, the originating company is a member of a *linked group and one of the following applies:
(i) the other entity is a company that is not a connected entity of the originating company and is a member of that linked group;
(ii) the other entity is a connected entity of the originating company;
(iii) the other entity is an *associate of such a connected entity.
(2) However, this Subdivision does not apply because of *CGT event B1 if title in the *CGT asset does not pass to the other entity when the agreement ends.
170-260 Linked group
(1) Companies that are linked to one another are a linked group .
(2) Two companies are linked to each other if:
(a) one of them has a controlling stake in the other; or
(b) the same entity has a controlling stake in each of them.
(3) For the purposes of this section, an entity has a controlling stake in a company at a particular time if the entity, or the entity and the entity's *associates between them:
(a) are able at that time to exercise, or control the exercise of, more than 50% of the voting power in the company (either directly, or indirectly through one or more interposed entities); or
(b) have at that time the right to receive for their own benefit (either directly, or indirectly through one or more interposed entities) more than 50% of any dividends that the company may pay; or
(c) have at that time the right to receive for their own benefit (either directly, or indirectly through one or more interposed entities) more than 50% of any distribution of capital of the company.
(4) If:
(a) apart from this subsection, an interest that gives an entity:
(i) the ability to exercise, or control the exercise of, any of the voting power in a company; or
(ii) the right to receive dividends that a company may pay; or
(iii) the right to receive a distribution of capital of a company;
would, in the application of paragraph (3)(a), (b) or (c), be counted more than once; and
(b) the interest is both direct and indirect;
only the direct interest is to be counted.
170-265 Connected entity
(1) An entity is a connected entity of the originating company at a particular time if, at that time:
(a) the entity is a trustee of a trust and either:
(i) if the trust is a *fixed trust - one or more companies that are members of the *linked group of which the originating company is a member, or one or more of those companies and their *associates, between them have the right to receive for their own benefit (either directly, or indirectly through one or more interposed entities) more than 50% of any distribution to beneficiaries of the trust of income or corpus of the trust; or
(ii) if the trust is not a fixed trust - any company that is a member of the linked group of which the originating company is a member or any associate of such a company benefits or is capable of benefiting under the trust; or
(b) the entity is an individual who has a controlling stake in the company.
(2) For the purposes of paragraph (1)(b), an individual has a controlling stake in a company at a particular time if the individual, or the individual and his or her *associates between them:
(a) are able at that time to exercise, or control the exercise of, more than 50% of the voting power in the company (either directly, or indirectly through one or more interposed entities); or
(b) have at that time the right to receive for their own benefit (either directly, or indirectly through one or more interposed entities) more than 50% of any dividends that the company may pay; or
(c) have at that time the right to receive for their own benefit (either directly, or indirectly through one or more interposed entities) more than 50% of any distribution of capital of the company.
(3) If:
(a) apart from this subsection, an interest that gives an entity:
(i) the ability to exercise, or control the exercise of, any of the voting power in a company; or
(ii) the right to receive dividends that a company may pay; or
(iii) the right to receive a distribution of capital of a company;
would, in the application of paragraph (2)(a), (b) or (c), be counted more than once; and
(b) the interest is both direct and indirect;
only the direct interest is to be counted.
170-270 Immediate consequences for originating company
If, apart from this Subdivision:
(a) the originating company would have made a *capital loss (except a capital loss that would be disregarded under a provision of this Act other than this Subdivision) as a result of the deferral event; or
(b) the originating company would have become entitled to a deduction in respect of the deferral event; or
(c) where the originating company is a partner in a partnership - the partnership would have become entitled to a deduction in respect of the deferral event;
the capital loss, the deduction or the partner's share of the deduction, as the case may be, is disregarded.
170-275 Subsequent consequences for originating company
(1) If, at a time after the deferral event, any one or more of the following events (the new events ) happens:
(a) the *CGT asset involved ceases to exist;
(b) the CGT asset or a greater than 50% interest in it is *acquired by an entity that is none of the following:
(i) a member of the *linked group of which the originating company is a member;
(ii) a connected entity of the originating company;
(iii) an associate of such a connected entity;
(c) if the asset is owned by a company that is a member of that linked group - that company ceases to be a member of the linked group;
(d) the originating company ceases to be a member of that linked group;
(e) if the CGT asset is owned by an entity that is a connected entity of the originating company or an associate of such a connected entity - the entity that owns the asset ceases to be such a connected entity or ceases to be an associate of the connected entity, as the case may be;
the originating company is taken, immediately before the time of the happening of the new event or the earliest of the new events, as the case may be, to have made a *capital loss equal to the amount of the capital loss referred to in section 170-270 or to have become entitled to a deduction equal to the deduction, or the share of the deduction, referred to in that section, as the case may be.
(2) If the *capital loss referred to in section 170-270 would have been made from a *personal use asset or from a *collectable, any corresponding capital loss that the originating company is taken by subsection (1) of this section to have made is taken to have been made from a personal use asset or from a collectable, as the case may be.
170-280 What happens if the asset is acquired by an entity of a particular kind within 4 years
(1) This section applies if:
(a) as a result of the occurrence of a new event in respect of a *CGT asset, the originating company is taken by subsection 170-275(1) to have made a *capital loss or to be entitled to a deduction; and
(b) within 4 years after the occurrence of the new event, the asset or a greater than 50% interest in it is *acquired by the originating company or by an entity that, at the time of the acquisition, is:
(i) a company that is a member of the *linked group of which the originating company is a member; or
(ii) a connected entity of the originating company; or
(iii) an associate of such a connected entity.
(2) The company is taken not to have made the *capital loss or not to have been entitled to the deduction, as the case may be.
(3) If, at a time after the new event, any one or more of the following events (the realisation events ) happens:
(a) the *CGT asset involved ceases to exist;
(b) the CGT asset or a greater than 50% interest in it is *acquired by an entity that is none of the following:
(i) a member of the *linked group of which the originating company is a member;
(ii) a connected entity of the originating company;
(iii) an associate of such a connected entity;
(c) if the asset is owned by a company that is a member of that linked group - that company ceases to be a member of the linked group;
(d) the originating company ceases to be a member of that linked group;
(e) if the CGT asset is owned by an entity that is a connected entity of the originating company or an associate of such a connected entity - the entity that owns the asset ceases to be such a connected entity or ceases to be an associate of the connected entity, as the case may be;
the originating company is taken, immediately before the time of the happening of the realisation event or the earliest of the realisation events, as the case may be , to have made a *capital loss equal to the amount of the capital loss referred to in subsection (2) or to have become entitled to a deduction equal to the deduction referred to in that subsection, as the case may be.
(4) If the *capital loss referred to in subsection (2) would have been made from a *personal use asset or from a *collectable, any corresponding capital loss that the originating company is taken by subsection (3) to have made is taken to have been made from a personal use asset or from a collectable, as the case may be.
[The next Division is Division 175]