Income Tax Assessment Act 1997



Division 316 - Demutualisation of friendly society health or life insurers  

Subdivision 316-B - Capital gains and losses connected with the demutualisation  

Gains and losses of members, insured entities and successors

SECTION 316-60   Taking account of some capital gains and losses involving receipt of money  

This section applies if:

(a) a *CGT event happens under the demutualisation to an entity ' s interest affected by demutualisation (see section 316-55 ); and

(b) the event involves:

(i) the variation or abrogation of rights attaching to or consisting of the interest; or

(ii) the conversion, cancellation, extinguishment or redemption of the interest; and

(c) either:

(i) the entity is one described in paragraph 316-55(1)(a) ; or

(ii) the entity is one described in paragraph 316-55(2)(a) and the interest is a *CGT asset described in paragraph 316-55(2)(b) ; and

(d) the *capital proceeds from the event include or consist of money received by the entity.

Work out whether the entity makes a *capital gain or *capital loss from the *CGT event, and the amount of the gain or loss, assuming that:

(a) the *capital proceeds from the CGT event were the amount they would be if they did not include any *market value of property other than money; and

(b) the *cost base and *reduced cost base for the interest were the amount worked out using the formula:

* Capital proceeds from the * CGT event × Valuation factor worked out
under section 316-65


Assume the entity receives $50 in money and 10 shares with a market value of $4 each in respect of CGT event C2 happening, and that the valuation factor worked out under section 316-65 is 0.9. The entity makes a capital gain from the event of $5, worked out as follows:

$ 50 − ( $ 50 × 0.9)

This ignores the market value of the shares because they are property other than money.


Division 114 (Indexation of cost base) is not relevant, because this section provides exhaustively for working out the amount of the cost base.

The *capital gain or *capital loss is not to be disregarded, despite:

(a) section 316-55 ; and

(b) any provision of this Act for disregarding the *capital gain or *capital loss because the interest affected by demutualisation was *acquired before 20 September 1985.


The capital gain is not a discount capital gain: see section 115-55 .

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