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Edited version of your written advice
Authorisation Number: 1012920415563
Date of advice: 4 December 2015
Ruling
Subject: Capital gains tax - Majority underlying interest in a public company
Question 1
Will the Commissioner extend the period which the taxpayer must give the Commissioner written evidence about which the majority underlying interests in the assets under subsection 149-55(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
Question 2
If the answer to question 1 is yes, then on the basis of the evidence given to the Commissioner under subsection 149-55(1) of the ITAA 1997, is the Commissioner satisfied that, or think it is reasonable to assume that, at the end of the test day (i.e. 30 June 2009), majority underlying interests in the assets were held by ultimate owners who also had majority underlying interests in the assets at the end of the starting day?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2006
Year ended 30 June 2007
Year ended 30 June 2008
Year ended 30 June 2009
The scheme commences on:
1 July 2009
Relevant facts and circumstances
The taxpayer is a public company.
In respect of earlier test days the taxpayer had provided evidence that satisfied the Commissioner that there were ultimate owners who held majority underlying interests.
On this basis the Commissioner issued favourable rulings to the taxpayer on the application of subsection 149-55(1) of the ITAA 1997.
In the application for this ruling the taxpayer provided similar evidence to the evidence provided for the earlier rulings that demonstrated that for the period 1 July 20XX to 30 June 20YY the ultimate owners who held majority underlying interests remained unchanged.
Relevant legislative provisions
ITAA 1997 Division 149
ITAA 1997 Subdivision 149C
ITAA 1997 subsection 149-15(1)
ITAA 1997 subsection 149-15(3)
ITAA 1997 subsection 149-55(1)
ITAA 1997 subsection 149-55(2)
ITAA 1997 subsection 149-55(7)
ITAA 1997 Subdivision 960-H
ITAA 1997 section 960-230
ITAA 1997 Division 995-1
Reasons for decision
Question 1
Will the Commissioner extend the period which the taxpayer must give the Commissioner written evidence about which the majority underlying interests in the assets under subsection 149-55(1) of the ITAA 1997?
Reasons Question 1
Subsection 149-55(1) of the ITAA 1997 states:
Within 6 months after each *test day, the entity must give the Commissioner written evidence about the *majority underlying interests in the asset at the end of that day. (The Commissioner can extend the period for doing so.)
Taxation Ruling TR 2004/7 Income tax: capital gains: application of Division 149 of the Income Tax Assessment Act 1997 and Division 20 of Part IIIA of the Income Tax Assessment Act 1936 to public entities deals with the application of Division 149 of the ITAA 1997 to public entities. Paragraph 75 of the Taxation Ruling provides details of the various matters to be considered when determining whether an extension of time should be granted. Paragraph 75 is detailed as follows:
"The following matters are usually relevant to deciding whether extra time should be allowed in all of these circumstances:
• The reasons why the entity was unable to make a determination, or a determination on a new basis, or provided written evidence with the period specified in the law or within any further period allowed by the Commissioner;
• In the case of a request for extra time to make a determination - whether the entity had reason to believe that its determination might be affected by Taxation Lows Amendment Act (No: 4) 1999 or by Taxation Ruling TR 1999/4 or this Ruling;
• Whether the entity has made all reasonable efforts to obtain the information necessary to make a determination or new determination, or to provide written evidence to the Commissioner;
• Whether the entity's request for an extension of time was made as soon as the need for more time became apparent;
• If the entity needs to obtain further information before making a determination or providing written evidence - whether there is reason to believe all outstanding information will be obtained within a reasonable time if extra time is allowed, and
• Whether it is likely that, at the end of the extended period, the entity will have sufficient grounds to determine, or the Commissioner will have grounds to be satisfied or reasonably to assume, that the majority underlying interests in the entity's assets have been maintained."
The evidence provided with the current application is similar to that provided when the Commissioner last ruled. In addition if we look at that evidence the majority underlying shareholders remain unchanged.
Had this evidence been provided within 6 months of the test day the Commissioner would have been satisfied with the evidence and would have provided the taxpayer with a favourable ruling.
The evidence shows that the taxpayer has satisfied the requirements of the subsection (other than the time factor). To not extend the time to provide the evidence now in effect means that the Commissioner would issue an unfavourable ruling.
Therefore the Commissioner has extended the date for providing this evidence to the we received the ruling application.
Question 2
If the answer to question 1 is yes, then on the basis of the evidence given to the Commissioner under subsection 149-55(1) of the ITAA 1997, is the Commissioner satisfied that, or think it is reasonable to assume that, at the end of the test day (i.e. 30 June 2009), majority underlying interests in the assets were held by ultimate owners who also had majority underlying interests in the assets at the end of the starting day?
Reasons Question 2
The Commissioner has already examined and found it reasonable to assume that the same ultimate owners who held majority underlying interests on the starting day continued to hold the majority underlying interests at 30 June 20XX.
The evidence provided with this application in respect of the majority underlying interests is similar to the evidence provided at 30 June 20XX.
Therefore if we examine ownership at the next 'test day' after 30 June 20XX and are satisfied the same people are still the same ultimate owners still held the majority underlying interests then we can answer Question 2 in the affirmative.
The evidence provided with this application demonstrates that the same ultimate owners who held majority underlying interests on the starting day and on 30 June 20XX were the same ultimate owners who held majority underlying interests at 30 June 20YY.
As a result the conclusions reached in respect of the test day on 30 June 20XX will continue to apply.
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