ATO Interpretative Decision

ATO ID 2003/337 (Withdrawn)

Income Tax

• ATO ID 2003/337 is withdrawn as it is based on a straightforward application of the law and has no interpretive value.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

If, as part of the restructure of a unit trust, the taxpayer, a unit holder of that trust, transfers all of their units to a company and the company issues shares as consideration, is this an 'exchange' for the purpose of paragraph 124-870(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The transfer of units in a unit trust to a company and the issue of shares by the company as consideration is an 'exchange' for the purpose of paragraph 124-870(1)(b) of the ITAA 1997.

Facts

The taxpayer owns units in a unit trust (the trust). The trust restructures by disposing of all its CGT assets to an Australian resident company limited by shares (the company). The taxpayer transfers all of their units in the trust to the company. The company issues shares as consideration for the units in the trust.

Reasons for Decision

Subsection 124-870(1) of the ITAA 1997 states:

You may choose to obtain a rollover if:

(a)

you own units or interests in the trust; and

(b)

the ownership of all your units or interests ends under a trust restructure in exchange for shares in a company.

The word 'exchange', which is used in paragraph 124-870(1)(b) of the ITAA 1997, is not specifically defined for income tax purposes in either the Income Tax Assessment Act 1936 or the ITAA 1997. Therefore the ordinary meaning of the word is used.

The Australian Oxford Dictionary, 1999, University Press, Melbourne, defines 'exchange' as:

a.

the act of or an instance of giving one thing and receiving another in its place.

b.

give or receive (one thing) in place of another.

The Macquarie Dictionary, 2002, revised 3rd edition, The Macquarie Library Pty Ltd, Sydney, defines 'exchange' as:

to part with for some equivalent, giving up (something) for something else

Therefore 'exchange' in paragraph 124-870(1)(b) of the ITAA 1997 means giving up units or interests in the restructuring trust and receiving shares in the company, to which the trust's assets were transferred, in its place. This includes the transfer of units in a unit trust to the company to which the unit trust is transferring all its CGT assets (under a Subdivision 124-N of the ITAA 1997 trust restructure) and the acquisition of shares in that company as consideration.

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 124-N
   subsection 124-870(1)
   paragraph 124-870(1)(b)

Other References:
Australian Oxford Dictionary, 1999, University Press, Melbourne.
Macquarie Dictionary, 2002, revised 3rd edition, The Macquarie Library Pty Ltd, Sydney.

Keywords
Acquisition of shares
Capital gains tax
CGT event A1-disposal of a CGT asset
CGT events C1-C3 - end of a CGT asset
CGT replacement asset roll-over
Disposal of unit trust units
Exchange of unit trust units
Unit trust restructuring
Unitholders

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  15 May 2003

ISSN: 1445-2782