Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 112 - Modifications to cost base and reduced cost base  

Subdivision 112-E - Deemed sales just before, and reacquisitions on, 1 July 2027  

SECTION 112-165   Trusts - deemed sale just before, and reacquisition on, 1 July 2027  

Application

112-165(1)    
This section applies in relation to a * CGT asset of a trust estate if:

(a)    on 30 June 2027, the asset is not a * pre-CGT asset; and

(b)    the trustee * acquired the asset and then held it throughout the period:

(i) starting at a time before 1 July 2027; and

(ii) ending at the end of 30 June 2027; and

(c)    the trustee continues to hold the asset until a * realisation event happens in relation to the asset on or after 1 July 2027; and

(d)    if it were assumed that the trust estate makes a * discount capital gain (the primary trust gain ) from the realisation event - at least one beneficiary of the trust makes, because of section 115-215 , a discount capital gain in relation to the primary trust gain for which:

(i) for a beneficiary who is an individual - section 115-110 (about foreign or temporary residents) does not apply; or

(ii) for a beneficiary that is another trust (other than a * complying superannuation entity) - section 115-120 (about foreign or temporary residents) does not apply; and

(e)    the asset is not an asset for which either:

(i) section 115-102 (about new residential dwellings); or

(ii) section 115-125 (about affordable housing);

applies in relation to all of the * capital gains that, because of section 115-215 , are made by the beneficiaries of the trust in relation to the capital gain the trust estate makes in relation to the realisation event.

Deemed sale and reacquisition

112-165(2)    
For the purposes of this Part, Part 3-3 and Subdivision 960-M , the trustee is taken:

(a)    to have sold the asset just before 1 July 2027, with the trustee ' s * capital proceeds for that sale taken to be the amount applying under subsection (3) ; and

(b)    to have * acquired the asset again just after that sale for an amount equal to those capital proceeds.

Note 1:

The sale under paragraph (a) happens on 30 June 2027, and the reacquisition under paragraph (b) happens on 1 July 2027.

Note 2:

Any capital gain or loss the trust estate makes from the sale on 30 June 2027 is disregarded (and deferred) until the income year in which the realisation event happens. The trustee (and beneficiaries) can wait until then before working out the amount of the capital gain or loss (see section 112-170 ).

Note 3:

Subdivision 960-M deals with indexation of a CGT asset ' s cost base.

112-165(3)    
The * capital proceeds are taken to be equal to:

(a)    unless paragraph (b) applies - the asset ' s * market value just before 1 July 2027; or

(b)    if the trustee chooses to use an apportioning method determined under section 112-185 - the amount of capital proceeds worked out using that method.

112-165(4)    
For the purposes of paragraph 103-25(1)(a) , the * realisation event is the relevant * CGT event for such a choice.

Note 1:

Section 103-25 sets out rules for making choices.

Note 2:

This subsection and section 103-25 mean the trustee does not have to make a choice until the day the trustee lodges the trust ' s income tax return for the income year in which the realisation event happens (see paragraph 103-25(1)(a) ).

Note 3:

The realisation event is the event mentioned in paragraph (1)(c) .

112-165(5)    
Except for the purposes of section 112-185 (about making apportioning determinations), none of the following apply in relation to a sale and acquisition mentioned in paragraphs (2)(a) and (b) for which a choice is made under paragraph (3)(b) :

(a)    Subdivisions 112-A , 112-B , 112-C and 112-D (about modifications of the cost base and reduced cost base);

(b)    sections 116-25 to 116-60 (about modifications of the general rules about capital proceeds).

112-165(6)    
To avoid doubt, subsection (2) applies only for the purposes of the provisions mentioned in that subsection. For example, it does not apply for the purposes of Subdivision EA of Division 7A of Part III of the Income Tax Assessment Act 1936 (about unpaid present entitlements).