INCOME TAX ASSESSMENT ACT 1936

SCHEDULE 2H - DEMUTUALISATION OF MUTUAL ENTITIES OTHER THAN INSURANCE COMPANIES AND HEALTH INSURERS  

Division 326 - DEMUTUALISATION  

Subdivision 326-D - CGT consequences of disposal of demutualisation shares or an interest in such shares by a member of a mutual entity where the entity or a holding company of the entity becomes a listed public company  

SECTION 326-125   UNDEDUCTED MEMBERSHIP COSTS  

326-125(1)  
For the purposes of this Subdivision, the undeducted membership costs , when the expression is used in relation to a disposer who did not acquire membership rights in the demutualising entity by the disposal of membership rights in another mutual entity, are the sum of the undeducted amounts of the costs that were incurred by the disposer in acquiring and maintaining membership in the demutualising entity less any distributions that:


(a) were made by the demutualising entity to the disposer before any shares in the demutualised entity were issued; and


(b) were not included in the disposer ' s assessable income of any year of income.

326-125(2)  
For the purposes of this Subdivision, the undeducted membership costs , when the expression is used in relation to a disposer who acquired membership rights in the demutualising entity by the disposal of membership rights in another mutual entity, are:


(a) if the disposer was a pre-CGT member - the sum of the undeducted amounts of the costs that were incurred by the disposer in maintaining membership in the demutualising entity less any distributions that:


(i) were made by the demutualising entity to the disposer before any shares in the demutualised entity were issued; and

(ii) were not included in the disposer ' s assessable income of any year of income; or


(b) if the disposer is a post-CGT member, the sum of:


(i) the undeducted amounts of the costs that were incurred by the disposer in acquiring and maintaining membership in the other entity; and

(ii) the undeducted amounts of the costs that were incurred by the disposer in maintaining membership in the demutualising entity;
less any distributions that:

(iii) were made by the demutualising entity or the other entity to the disposer before any shares in the demutualised entity were issued; and

(iv) were not included in the disposer ' s assessable income of any year of income.

326-125(3)  
If at any time 2 or more persons were joint members of a mutual entity, any costs incurred by any one or more of them in acquiring or maintaining the joint membership are taken to have been incurred by each of them.

326-125(4)  
Subject to subsection (5), the undeducted amount of a cost is the amount of the cost to the extent to which a deduction has not been allowed, and is not allowable, in respect of it.

326-125(5)  
If:


(a) an amount of a cost referred to in subsection (1) or (2) was incurred before the demutualisation resolution day; and


(b) the indexation factor (see section 326-235 ) of the amount is more than one;

a reference in this section to the undeducted amount of that cost is a reference to the undeducted amount as indexed under Subdivision 326-M .


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