Edited version of private advice

Authorisation Number: 1051796777093

Date of advice: 19 January 2021

Ruling

Subject: Income tax - capital gains tax

Question 1

Is the Discretionary Trust A able to make a choice, under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for the income year in which the relevant CGT event happened within a further time allowed by the Commissioner, for capital gains tax rollover under section 124-781 of the ITAA 1997 regarding the exchange of its units in Unit Trust C for units in Unit Trust D?

Answer

Yes. Having considered the full circumstances and the relevant facts, the Commissioner will exercise the discretion under paragraph 103-25(1)(b) of the ITAA 1997 and allow an extension of time for the Discretionary Trust A to make a choice under section 124-781 of the ITAA 1997 for capital gains tax rollover regarding the exchange of its units in Unit Trust C for units Unit Trust D.

Question 2

Is the Discretionary Trust B able to make a choice, under paragraph 103-25(1)(b) of the ITAA 1997 for the income year in which the relevant CGT event happened within a further time allowed by the Commissioner, for capital gains tax rollover under section 124-781 of the ITAA 1997 regarding the exchange of its units in Unit Trust C for units in Unit Trust D?

Answer

Yes. As above, having considered the full circumstances and the relevant facts, the Commissioner will exercise the discretion under paragraph 103-25(1)(b) of the ITAA 1997 and allow an extension of time for the Discretionary Trust B to make a choice under section 124-781 of the ITAA 1997 for capital gains tax rollover regarding the exchange of its units in Unit Trust C for units in Unit Trust D. Further information on the factors the Commissioner considers in determining whether to allow an extension of time can be found by searching 'QC 23096' on ato.gov.au.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 August 20YY

Relevant facts and circumstances

A Pty Ltd (APL) was incorporated on DDMMYY and acts solely as trustee of A Trust (AT). AT was established on DDMMYY.

Person B acts as trustee of B Family Trust (BFT). BFT was established on DDMMYY.

C Pty Ltd (CPL) was incorporated on DDMMYY and acts solely as trustee of C Unit Trust (CUT). CUT was established on DDMMYY.

On DDMMYY, APL as trustee of AT acquired ZZZZ units in CUT representing YY% of its issued units.

On DDMMYY, Person B as trustee of BFT acquired YYY units in CUT representing X% of its issued units.

At the time of trigger event (1 August, 20YY), AT and BFT each held WW% and VV% respectively in CUT.

Person A is director of APL, CPL and DPL.

Person B is director of CPL and DPL.

On 1 August 20YY, (CGT trigger event date) Person A and Person B restructured their commercial arrangements to interpose a unit trust (DUT) into their group (restructure).

To achieve the restructure, D Pty Ltd was incorporated on DDMMYY to act as trustee of D Unit Trust (DUT). DUT was established on DDMMYY.

The restructure required an exchange of all AT and BFT interests in CUT for equivalent interests in DUT.

The result of the restructure is AT owns WW% of issued units in DUT and BFT owns VV% of issued units in DUT. DUT owns 100% of issued units in CUT.

AT and BFT received no consideration for the exchange of CUT units other than units in DUT.

A CGT event arises in respect to the restructure. The restructure is subject to a rollover as stated in section 124-781 ITAA 1997.

The choice to elect the rollover was not made by the day AT and BFT lodged their respective income tax returns for the income year in which the CGT event happened

Person A and Person B were unaware that a choice was available and seek further time to make that choice.

Person A, Person B and all entities noted are Australian residents for tax purposes

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 103-25

Income Tax Assessment Act 1997 Section 124-781