ATO Interpretative Decision

ATO ID 2004/874 (Withdrawn)

Income Tax

Capital gains tax - roll-over by partners to a wholly-owned company
FOI status: may be released

This ATO ID is withdrawn because it is a restatement of the law and does not contain an interpretative decision.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.

Status of this decision: Decision Withdrawn 8 August 2014

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Does the reference to 'partnership' in section 122-125 of the Income Tax Assessment Act 1997 (ITAA 1997) include a reference to what is commonly known as a 'tax law' partnership?

Decision

Yes. The reference to 'partnership' in section 122-125 of the ITAA 1997 includes a reference to a 'tax law' partnership. Accordingly, the partners in a 'tax law' partnership may choose rollover under Subdivision 122-B of the ITAA 1997 if the other conditions of the rollover are satisfied.

Facts

The taxpayer and their spouse own an income producing property (acquired after 20 September 1985) as joint tenants. They intend to dispose of their interests in the property to a wholly owned company.

Reasons for Decision

Subdivision 122-B of the ITAA 1997 provides a rollover where the partners in a partnership transfer assets to a wholly owned company. In particular, under section 122-125 of the ITAA 1997 all the partners in a partnership can choose a rollover on disposing of their interests in a CGT asset of the partnership, or all the assets of a business carried on by the partnership, to the company.

The issue arises as to whether the reference to 'partnership' in section 122-125 of the ITAA 1997 includes a reference to what is commonly known as a 'tax law' partnership or whether the provision only applies where a business is being carried on (that is, to a 'general law' partnership).

A 'tax law' partnership, as described in the second limb of paragraph (a) of subsection 995-1(1) of the ITAA 1997 definition of partnership, is: 'an association of persons (other than a company or a limited partnership) ... in receipt of ordinary income or statutory income jointly' (and not carrying on business as partners).

It is considered that the expanded definition of partnership contained in subsection 995-1(1) of the ITAA 1997 applies for the purposes of Subdivision 122-B of the ITAA 1997. In particular, in this context it is considered the joint owners of income producing property are partners of the ensuing 'tax law' partnership and the jointly owned income producing property is a CGT asset of that partnership. As such, it is considered the reference to a 'partnership' in section 122-125 of the ITAA 1997 includes a reference to a 'tax law' partnership.

Accordingly, the partners in a 'tax law' partnership may choose Subdivision 122-B rollover if the other conditions of the roll-over are satisfied.

Date of decision: 9 September 2004

Year of income: Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 122-B
   section 122-125
   subsection 995-1(1)

Keywords
Capital gains tax
CGT assets
CGT choice
CGT roll-over relief
CGT same asset roll-over
Disposal of shares
Partnerships
Shares

Business Line: Private Groups and High Wealth Individuals

Date of publication: 12 November 2004

ISSN: 1445-2782

history

	Date:	Version:
	9 September 2004	Original statement
You are here →	8 August 2014	Archived

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