Income Tax Assessment Act 1936

SCHEDULE 2D - TAX EXEMPT ENTITIES THAT BECOME TAXABLE  

Division 57 - Tax exempt entities that become taxable  

Subdivision 57-E - Assets and liabilities  

SECTION 57-25   DEEMED DISPOSAL AND RE-ACQUISITION OF ASSETS  

57-25(1)  
This section applies to:


(a) the disposal of an asset by the transition taxpayer after the transition time; and


(b) a CGT event that happens after the transition time in relation to an asset owned by the transition taxpayer;

where the transition taxpayer owned the asset at all times from the transition time until the disposal or the CGT event.

57-25(2)   Deemed disposal and re-purchase.  

Subject to subsection (5), in determining for the purposes of this Act (other than the excluded provisions mentioned in subsection (4)) whether an amount is included in, or allowable as a deduction from, the assessable income of the transition taxpayer in respect of the disposal, the transition taxpayer is taken:


(a) to have sold, immediately before the transition time, each of its assets; and


(b) to have purchased each of its assets again at the transition time for consideration equal to the asset ' s adjusted market value at the transition time.

57-25(2A)  
For the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (about CGT), in determining whether the transition taxpayer makes a capital gain or capital loss from a CGT event that happens after the transition time in relation to an asset referred to in subsection (1), the cost base and reduced cost base of the asset (at the transition time) is its adjusted market value at that time.

57-25(3)  
An asset ' s adjusted market value at the transition time is the asset ' s market value at that time:


(a) reduced by any amount of income received or receivable by the transition taxpayer in respect of the asset at or after the transition time that:


(i) because of subsection 57-15(2) ; or

(ii) because all of the income of the transition taxpayer was wholly exempt from income tax before the transition time;
is not included in the transition taxpayer ' s assessable income; and


(b) increased by any amount of income received or receivable by the transition taxpayer in respect of the asset before the transition time that:


(i) because of subsection 57-15(1) ; or

(ii) because the transition taxpayer ' s income ceased to be exempt from income tax at the transition time;
is included in the transition taxpayer ' s assessable income.
Note:

If the asset is, or is part of, a Division 230 financial arrangement, section 57-32 may affect how the market value of the asset is worked out.

57-25(4)   Excluded provisions.  

For the purposes of subsection (2), the excluded provisions are:


(a) - (d) (Repealed by No 101 of 2006 )


(e) former Division 10B of Part III of this Act (about industrial property); and


(f) former Division 10BA of Part III of this Act (about Australian films); and


(g) (Repealed by No 101 of 2006 )


(ga) Division 40 of the Income Tax Assessment Act 1997 (about capital allowances); and


(h) (Repealed by No 101 of 2006 )


(i) Division 43 of the Income Tax Assessment Act 1997 (about deductions for capital works); and


(j) section 70-120 of the Income Tax Assessment Act 1997 (about deducting capital costs of acquiring trees);


(k) (Repealed by No 101 of 2006 )


(la) Division 373 of the Income Tax Assessment Act 1997 (about intellectual property).


(l) (Repealed by No 101 of 2006 )

57-25(5)   Listed provisions not affected.  

If the transition taxpayer:


(a) acquired an asset (whether before the transition time or otherwise) before the commencement of a provision listed in subsection (6); and


(b) after acquiring the asset, owned the asset at all times before the transition time;

the deemed acquisition of the asset under subsection (2) does not affect the operation of the listed provision.

57-25(6)   Listed provisions.  

The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .


Listed provisions
Item Provision
1 section 26BB
2 (Repealed by No 47 of 2016)
3 section 70B
4 the former Division 3B of Part III
5 Division 16E of Part III
6 Subdivision 20-A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under the former subsection 82Z(1) .
6A Division 230
7 Division 775
8 Subdivision 20-A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under section 775-30.

57-25(6A)  


For the purposes of the application of subsection (5) to the transition taxpayer, a provision covered by item 7 or 8 of the table in subsection (6) is taken to have commenced at the start of the taxpayer ' s applicable commencement date (within the meaning of Division 775 of the Income Tax Assessment Act 1997 ).
Note:

For applicable commencement date , see section 775-155 of the Income Tax Assessment Act 1997 .

57-25(6B)  


The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer in relation to a provision covered by item 7 or 8 of the table in subsection (6) if the taxpayer makes an election under section 775-150 of the Income Tax Assessment Act 1997 .

57-25(7)   Avoidance of doubt - debt write-off.  

To avoid doubt, an effect of subsection (2) is that the sum of all allowable deductions (if any) in respect of the writing off as bad of the whole or part of a debt to which that subsection applies will not exceed the market value of the debt at the transition time.

57-25(8)   Avoidance of doubt - disposal need not involve an alienation.  

To avoid doubt, an asset may be disposed of for the purposes of this section whether or not the disposal involves alienating the asset.


 

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