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Subject: Corporate restructure and disposal of a wholly owned company
Question 1
Will subsection 768-505(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the disposal of shares in the wholly owned company?
Answer
Yes
Question 2
Will paragraph 768-540(2)(g) of the ITAA 1997 exclude a particular asset owned by the wholly owned company from being an "active foreign business asset" under subsection 768-540(1) of the ITAA 1997?
Answer
No
Question 3
Will the first element of the taxpayer's cost base under subsection 110-25(2) of the ITAA 1997 of the shares in the wholly owned company include the market value of the shares in a wholly owned subsidiary member?
Answer
Yes
Question 4
Will the Commissioner exercise the discretion under subsection 177F(1) of the Income Tax Assessment Act 1936 (ITAA 1936) to cancel a tax benefit of a kind referred to in that subsection obtained or that would but for section 177F of the ITAA 1936 be obtained, by the taxpayer in connection with the scheme?
Answer
No
Question 5
Is the taxpayer's tax cost of its shares in a wholly owned subsidiary member, at the time that all of the shares in the wholly owned subsidiary member are transferred to another wholly owned company equal to the taxpayer's terminating value for a particular asset pursuant to Divisions 701 and 711 of the ITAA 1997?
Answer
Yes
This ruling applies for the following period:
Year ending 30 June 2012
The scheme commences in:
Income year ending 30 June 2012
Relevant facts and circumstances
The taxpayer is the head company of an income tax consolidated group.
The taxpayer will undertake a corporate restructure and sell part of its interest in a wholly owned company to a third party purchaser (the Scheme).
The taxpayer is not an Australian Financial Institution ('AFI') or an AFI subsidiary.
The Scheme must achieve certain commercial objectives including certain features required by the purchaser.
The Scheme will be undertaken at market value at the time of each relevant transaction under the Scheme.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10.
Income Tax Assessment Act 1997 paragraph 104-103)(a).
Income Tax Assessment Act 1997 subsection 110-25(2).
Income Tax Assessment Act 1997 subsection 112-20(1).
Income Tax Assessment Act 1997 paragraph 112-20(2)(b).
Income Tax Assessment Act 1997 Division 230.
Income Tax Assessment Act 1997 Division 701.
Income Tax Assessment Act 1997 section 701-1.
Income Tax Assessment Act 1997 subsection 703-15(2).
Income Tax Assessment Act 1997 section 703-30
Income Tax Assessment Act 1997 subsection 705-30(3B).
Income Tax Assessment Act 1997 Division 711.
Income Tax Assessment Act 1997 paragraph 711-15(1)(c).
Income Tax Assessment Act 1997 section 711-20.
Income Tax Assessment Act 1997 subsection 711-20(1).
Income Tax Assessment Act 1997 section 711-25.
Income Tax Assessment Act 1997 section 711-30.
Income Tax Assessment Act 1997 subsection 711-30(2).
Income Tax Assessment Act 1997 section 711-35.
Income Tax Assessment Act 1997 section 711-40.
Income Tax Assessment Act 1997 section 711-45.
Income Tax Assessment Act 1997 section 711-55.
Income Tax Assessment Act 1997 Subdivision 713-E.
Income Tax Assessment Act 1997 section 713-255.
Income Tax Assessment Act 1997 subsection 713-255(5).
Income Tax Assessment Act 1997 Subdivision 768-G.
Income Tax Assessment Act 1997 section 768-505.
Income Tax Assessment Act 1997 subsection 768-505(1).
Income Tax Assessment Act 1997 subsection 768-540(1).
Income Tax Assessment Act 1997 paragraph 768-540(1)(d).
Income Tax Assessment Act 1997 paragraph 768-540(2)(g).
Income Tax Assessment Act 1997 subsection 995-1(1).
Income Tax Assessment Act 1936 Part IVA.
Income Tax Assessment Act 1936 section 177A.
Income Tax Assessment Act 1936 section 177C.
Income Tax Assessment Act 1936 subsection 177C(1).
Income Tax Assessment Act 1936 section 177D.
Income Tax Assessment Act 1936 paragraph 177D(a).
Income Tax Assessment Act 1936 paragraph 177D(b).
Income Tax Assessment Act 1936 section 177F.
Income Tax Assessment Act 1936 subsection 177F(1).
Income Tax Assessment Act 1936 Part X.
Reasons for decision
Question 1
The Commissioner ruled that subsection 768-505(1) of the ITAA 1997 will apply to the disposal of shares in the wholly owned company.
Question 2
The Commissioner ruled that paragraph 768-540(2)(g) of the ITAA 1997 will not exclude the particular asset owned by the wholly owned company from being an "active foreign business asset" under subsection 768-540(1) of the ITAA 1997.
Question 3
The Commissioner ruled that the first element of the taxpayer's cost base under subsection 110-25(2) of the ITAA 1997 of its shares in the wholly owned company will constitute the market value of the shares in a wholly owned subsidiary member.
Question 4
The Commissioner will not make a determination under section 177F of the ITAA 1936 as there is no tax benefit obtained in connection with a scheme to which Part IVA applies.
Question 5
The Commissioner ruled that the taxpayer's tax cost of its shares in the wholly owned subsidiary member, at the time that all of the shares in the wholly owned subsidiary member are transferred to another wholly owned company is equal to the taxpayer's terminating value of the particular asset pursuant to Divisions 701 and 711 of the ITAA 1997.