ATO Interpretative Decision

ATO ID 2003/911 (Withdrawn)

Income Tax

CGT: Rollover of assets held in a low-value pool from a partnership to a wholly-owned company
FOI status: may be released

This ATO ID is withdrawn from the database as it is a straight application of the law and does not contain an interpretative decision.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is CGT rollover relief under section 122-170 of the Income Tax Assessment Act 1997 (ITAA 1997) available for the transfer of partnership assets held in a low-value pool, in accordance with section 40-425 of the ITAA 1997, to a company wholly-owned by the partners?

Decision

Yes. CGT rollover relief under section 122-170 of the ITAA 1997 is available for the transfer of partnership assets held in a low-value pool, in accordance with section 40-425 of the ITAA 1997, to a company wholly-owned by the partners.

Facts

The partnership commenced business prior to the introduction of capital gains tax. The partnership consists of three partners, each holding a one-third interest. The third partner acquired his interest in the partnership after 19 September 1985.

The partnership owns and uses a wide range of equipment and the partners believe it would be appropriate to transfer the business into a company structure in order to protect their personal assets.

The partners intend to transfer all of the assets of the business, including qualifying assets in a low-value pool, to a company they wholly-own.

Reasons for Decision

Section 122-170 is contained in Subdivision 122-B of the ITAA 1997. The subdivision outlines the circumstances in which the partners in a partnership can claim capital gains tax (CGT) rollover relief if an asset, or all the assets of the partnership, are transferred to a company which is wholly-owned by the partners. The subdivision also covers the situation where an asset is created by the partners in a wholly-owned company.

The arrangement proposed by the partners will meet the requirements of Subdivision 122-B of the ITAA 1997, so CGT rollover relief is available under section 122-170 of the ITAA 1997.

The effect of the rollover relief is that any capital gain or capital loss made by the partners on the transfer of the assets of the business, is disregarded (section 122-170 of the ITAA 1997). However, the rollover relief under section 122-170 does not extend to any deductions or amounts included in income under the balancing adjustment rules for low-value pool assets in section 40-445 of the ITAA 1997, which apply to the taxable use percentage of the assets.

Date of decision: 20 June 2003

Year of income: Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   section 40-425
   section 40-445
   section 122-170

Related ATO Interpretative Decisions
ATO ID 2003/910

Keywords
Capital gains tax
CGT replacement asset roll-over
CGT roll-over relief
Hold a depreciating asset
Partnership asset

Business Line: Losses and CGT Centre of Expertise

Date of publication: 10 October 2003

ISSN: 1445-2782

history

	Date:	Version:
	20 June 2003	Original statement
You are here	26 March 2010	Archived

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).