Taxation Laws Amendment Act (No. 2) 2004 (20 of 2004)

Schedule 7   Roll-over relief for partnerships that are STS taxpayers

Income Tax Assessment Act 1997

8   At the end of Subdivision 328-D

Add:

328-240 Roll-over relief for partnership changes

(1) There is roll-over relief if:

(a) *balancing adjustment events occur for *depreciating assets on a day (the BAE day ) because of subsection 40-295(2) as a result of a variation in the constitution of a partnership or in the interests of the partners; and

(b) deductions for the assets are calculated under this Subdivision; and

(c) the entity or entities that had an interest in the assets just before the balancing adjustment events occurred (the transferor ) and the entity or entities that have an interest in the assets just after the events occurred (the transferee ) jointly choose the roll-over relief; and

(d) the conditions in section 328-243 are met.

Note: There will be another BAE day in the income year if there is a variation in the constitution of the transferee partnership or in the interests of the partners and a further roll-over is chosen.

(2) The choice must:

(a) be in writing; and

(b) contain enough information about the transferor's *holding of the assets for the transferee to work out how this Subdivision applies to the transferee's holding of the assets; and

(c) be made within 6 months after the end of the transferee's income year (the BAE year ) in which the *balancing adjustment events occurred, or within a longer period allowed by the Commissioner.

(3) If a person dies before the end of the time allowed for jointly choosing roll-over relief, the trustee of the person's estate may be a party to the choice.

(4) The transferor must keep the choice or a copy of it for 5 years after the *balancing adjustment events occurred.

Penalty: 30 penalty units.

Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

(5) The transferee must keep the choice or a copy of it until the end of 5 years after the next *balancing adjustment event occurs for any of the *depreciating assets.

Penalty: 30 penalty units.

328-243 Conditions for roll-over relief

(1) The transferee must become an *STS taxpayer for the BAE year.

(2) All of the *depreciating assets that, just before the *balancing adjustment events occurred, were:

(a) *held by the transferor; and

(b) allocated to the transferor's *general STS pool or *long life STS pool;

must be held by the transferee just after those events occurred.

328-245 Consequences of roll-over

(1) The transferor does not subtract anything for the *balancing adjustment events under:

(a) paragraph (a) of step 2 in the method statement in section 328-200; or

(b) subsection 328-210(2).

(2) Subsection 328-215(4) does not apply to the *balancing adjustment events for the transferor.

(3) A choice made by the transferor for a *depreciating asset under subsection 328-175(3) (about primary production assets) applies to the transferee as if it had been made by the transferee.

(4) Sections 328-247 to 328-257 have effect.

328-247 Pool deductions

(1) The amount that can be deducted for the transferor's *general STS pool and *long life STS pool for the BAE year under subsection 328-190(1) or section 328-210 for the BAE year is split equally between:

(a) the transferor and the transferee; or

(b) if there are 2 or more variations in the constitution of a relevant partnership or in the interests of the partners for the BAE year and a roll-over is chosen for each variation - the partnerships concerned.

Example: John and Dave operate a dry cleaning business in partnership (the transferor). The transferor is an STS taxpayer. On the 90th day of an income year, Jonathan joins the partnership. The new partnership (the transferee) becomes an STS taxpayer for the income year. Had there been no partnership change, a deduction of $6,600 would have been available for the transferor's general STS pool. The transferor and transferee jointly choose the roll-over.

The deduction available to the transferor and the transferee for the pool under subsection 328-190(1) is $3,300 each.

(2) The transferor cannot deduct any amount for the transferor's *general STS pool or *long life STS pool for an income year after the BAE year.

328-250 Deductions for assets first used in BAE year

(1) This section applies in working out the amount that the transferor or transferee can deduct for the BAE year under subsection 328-180(1) (low-cost assets) or subsection 328-190(2) (assets that will be pooled) for a *depreciating asset that the transferor or transferee started to use, or have *installed ready for use, for a *taxable purpose during the BAE year.

Asset first used by transferor

(2) If the asset was first used or *installed ready for use by the transferor, the amount that can be deducted under subsection 328-180(1) or subsection 328-190(2) for the asset for the BAE year is split equally between:

(a) the transferor and the transferee; or

(b) if there are 2 or more variations in the constitution of a relevant partnership or in the interests of the partners for the BAE year and a roll-over is chosen for each variation - the partnerships concerned.

Asset first used by transferee

(3) If the asset was first used or *installed ready for use by the transferee:

(a) the transferor cannot deduct anything for the asset for the BAE year; and

(b) the amount that can be deducted under subsection 328-180(1) or 328-190(2) for the asset for the BAE year is:

(i) deductible by the transferee; or

(ii) if there are 2 or more variations in the constitution of a relevant partnership or in the interests of the partners for the BAE year and a roll-over is chosen for each variation - split equally between the partnerships concerned (except ones that did not use the asset or have it installed ready for use).

Example: To continue the example from section 328-247, the transferee buys a low-cost asset on the 150th day of the BAE year for $800.

On the 250th day of the year, Evan joins the transferee partnership. The new transferee partnership becomes an STS taxpayer for the BAE year, and a further roll-over is chosen.

The original transferor cannot deduct anything for the asset. The original transferee (now a transferor) and the new transferee can deduct $400 each.

Special rule for low-cost assets

(4) Subsection (5) applies if:

(a) the transferor started to use, or have *installed ready for use, a *low-cost asset during the BAE year; and

(b) a *balancing adjustment event occurs for that asset before the BAE day.

(5) The transferee cannot deduct anything for the asset for the BAE year, and subsection 328-215(4) does not apply to the transferee in relation to the asset.

328-253 Deductions for cost addition amounts

(1) This section applies in working out the amount that the transferor or transferee can deduct for the BAE year under subsection 328-180(2) or 328-190(3) for expenditure incurred by the transferor or transferee during the BAE year that is included in the second element of the *cost of a depreciating asset.

Expenditure incurred by transferor

(2) If the expenditure was incurred by the transferor, the amount that can be deducted under subsection 328-180(2) or 328-190(3) for the BAE year is split equally between:

(a) the transferor and the transferee; or

(b) if there are 2 or more variations in the constitution of a relevant partnership or in the interests of the partners for the BAE year and a roll-over is chosen for each variation - the partnerships concerned.

Expenditure incurred by transferee

(3) If the expenditure was incurred by the transferee:

(a) the transferor cannot deduct anything for the expenditure for the BAE year; and

(b) the amount that can be deducted under subsection 328-180(1) or 328-190(2) for the expenditure for the BAE year is:

(i) deductible by the transferee; or

(ii) if there are 2 or more variations in the constitution of a relevant partnership or in the interests of the partners for the BAE year after the expenditure was incurred and a roll-over is chosen for each variation - split equally between the partnerships concerned.

Special rule for expenditure on low-cost assets

(4) Subsection (5) applies if:

(a) the transferor incurred the expenditure in relation to a *low-cost asset; and

(b) a *balancing adjustment event occurs for that asset before the BAE day.

(5) The transferee cannot deduct anything for the expenditure for the BAE year, and subsection 328-215(4) does not apply to the transferee in relation to the asset.

328-255 Closing pool balance etc. below zero

(1) This section applies if:

(a) the *closing pool balance of the transferor's *general STS pool or *long life STS pool for the BAE year is less than zero; or

(b) the amount worked out under subsection 328-210(2) for that pool for the BAE year is less than zero;

because a *balancing adjustment event occurred for an asset allocated to that pool during that year.

(2) The amount included in assessable income under subsection 328-215(2) is split equally between:

(a) the transferor and transferee; or

(b) if there are 2 or more variations in the constitution of a relevant partnership or in the interests of the partners for the BAE year and a roll-over is chosen for each variation - the partnerships concerned.

328-257 Taxable use

(1) This section applies to *depreciating assets (the previously held assets ) that were *held by the transferor just before the *balancing adjustment events occurred.

(2) Subsection 328-205(1) (about estimates of taxable use) does not apply to previously held assets in the hands of the transferee for the BAE year. Instead, the transferee uses for the BAE year:

(a) the estimate made by the transferor under that subsection for the asset; or

(b) if the transferor had made one or more estimates for the asset under subsection 328-225(1) that resulted in an adjustment under section 328-225 (about change in business use) - that estimate or the most recent of those estimates.

(3) Section 328-225 applies to the transferee for each previously held asset for income years after the BAE year as if:

(a) the transferee had *held the asset during the period that the transferor held it; and

(b) estimates applicable to the transferor for the asset under that section were also applicable to the transferee.


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