ATO Interpretative Decision

ATO ID 2004/699 (Withdrawn)

Income tax

• This ATO ID 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.

Issue

Has the taxpayer, a financial services provider who moved to the financial services reform (FSR) regime, acquired separate interests in the Australian financial services licence (AFS licence) under section 124-895 of the Income Tax Assessment Act 1997 (ITAA 1997), where the taxpayer had owned an old licence acquired before 20 September 1985 (pre-CGT) and another acquired after that date (post-CGT)?

Decision

Yes. The taxpayer has acquired separate pre-CGT and post-CGT interests in the AFS licence under subsections 124-895(4) to 124-895(7) of the ITAA 1997.

Facts

A taxpayer had two old licences acquired under the relevant law in force before the commencement of the Financial Services Reform Act 2001. One of the licences was acquired before 20 September 1985 and the other licence was acquired after that date. The old licences ceased to have effect when the taxpayer was granted the AFS licence during the transition to the FSR regime.

The taxpayer satisfied all the requirements for the same owner old licence rollover in section 124-880 of the ITAA 1997.

Reasons for Decision

Where a taxpayer satisfies the conditions set out in sections 124-880 or 124-890 of the ITAA 1997, the rollover relief in Subdivision 124-A of the ITAA 1997 is available, subject to the modifications in section 124-895 of the ITAA 1997.

Subsections 124-895(4) to 124-895(7) of the ITAA 1997 include modifications where the taxpayer acquired some original assets before 20 September 1985 and some on or after that date.

The outcomes for the taxpayer applying the provisions of Subdivision 124-A and the modifications in section 124-895 are:

•

part of a replacement asset that relates to the original pre-CGT asset is taken to be a separate asset and a pre-CGT asset;

•

the first element of the cost base or reduced cost base of the other part of the replacement CGT asset is taken to be the sum of:

•

the cost base or reduced cost base of the original post-CGT asset; and

•

a reasonable proportion of any amount paid to get the replacement asset that relates to that other part of the replacement CGT asset.

An example of the application of these subsections is where a taxpayer had:

•

a pre-CGT old licence with a cost base of $3,000;

•

a post-CGT old licence with a cost base of $2,000; and

•

paid $500 to get the replacement AFS licence.

The part of the replacement AFS licence that is taken to be a separate post-CGT asset is 40% calculated as follows:

[Cost base of the pre-CGT old licence / Total cost bases of the old licences] * 100
[$2,000/%5,000] * 100 = 40%


The first element of the cost base of the other part of the replacement AFS licence is $2,200, calculated as follows:

Cost base of the old post-CGT licence + 40% of the cost of the AFS licence

$2,000 + 40% of $500
$2,000 + $200 = $2,200


The taxpayer is eligible for the same owner old licence rollover relief provided by section 124-895 of the ITAA 1997. The taxpayer has acquired separate pre-CGT and post-CGT interests in the AFS licence.

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 124-A
   section 124-880
   section 124-890
   section 124-895
   subsection 124-895(4)
   subsection 124-895(5)
   subsection 124-895(6)
   subsection 124-895(7)

Related ATO Interpretative Decisions
ATO ID 2004/573

Keywords
Australian financial services licence
Capital gains tax
CGT cost base
Financial services reform regime
Financial services reform transitions
FSR original asset
FSR regime
FSR replacement asset
Old licence roll-over
Pre-CGT assets
Same owner roll-over

Business Line:  Losses and Capital Gains Tax Centre of Expertise

Date of publication:  27 August 2004

ISSN: 1445-2782