Subdivision 138-C—Adjustment of direct interests for CGT events A1 and B1 (pre and post CGT assets)

Guide to Subdivision 138-C

138-155 What this Subdivision does

This Subdivision adjusts the cost base of shares or loans by a reasonable amount where CGT event A1 or B1 happened in relation to:

(a) certain CGT assets that were acquired before the companies came under common ownership; or

(b) certain pre-CGT assets that were acquired after common ownership.

Table of sections

138-160 Assets acquired before common ownership

138-165 Subdivision not to apply to certain plant

138-170 Adjustment to cost base

138-175 Deciding what is a reasonable adjustment

138-180 Application to pre-common ownership group

138-185 Pre-CGT asset acquired after common ownership

[This is the end of the Guide.]

138-160 Assets acquired before common ownership

(1) You may have to reduce the *cost base and *reduced cost base of a *share you have in, or a loan you have to, the originating company under section 138-170 if:

(a) the trigger event is CGT event A1 or B1; and

(b) you *acquired the share or loan on or after 20 September 1985 and owned it at the time of the trigger event; and

(c) the originating company acquired the asset to which the event happened before it and the recipient company last came *under common ownership; and

(d) the conditions in subsection (2) are satisfied, or the condition in subsection (3) is satisfied.

(2) The conditions are that:

(a) the originating company must have *acquired the *CGT asset on or after 20 September 1985 (ignoring Division 149 (about when an asset stops being a pre-CGT asset)); and

(b) at the time when the companies last came under common ownership, the sum of the market values of the assets of the originating company must have substantially exceeded the sum of the *cost bases of those assets.

(3) The condition is that the originating company must have *acquired the *CGT asset before 20 September 1985 (whether or not this Part and Part 3-1 apply to it as if it had been acquired on or after 20 September 1985 because of Division 149).

Note: If no reduction is made under this Subdivision, an adjustment may be required under Subdivision 138-D in relation to:

138-165 Subdivision not to apply to certain plant

This Subdivision does not apply to *plant described in section 138-85.

138-170 Adjustment to cost base

If the requirements of section 138-160 are satisfied, you reduce the *cost base and *reduced cost base of the *share or loan by a reasonable amount.

138-175 Deciding what is a reasonable adjustment

(1) In deciding whether a reduction is necessary to the *cost base and reduced cost base of a *share or loan and, if so, what reduction is reasonable, have regard to the matters set out in subsection (2) or those set out in subsection (3).

(2) The first set of matters is:

(a) the circumstances in which you *acquired the share or loan; and

(b) the extent (if any) to which the market value of the share or loan was reduced as a result of the trigger event happening; and

(c) the extent (if any) to which what you paid or gave to acquire the share or loan is attributable to the *CGT asset to which the trigger event happened.

(3) The second set of matters is:

(a) the *indexed common ownership market value of the *CGT asset; and

(b) the amount of the *capital proceeds from the trigger event.

(4) The indexed common ownership market value of the *CGT asset is the market value of the asset at the last time the originating company and the recipient company came *under common ownership, indexed by reference to the index number for the quarter in which the trigger event happened and the index number for the quarter in which the first and second companies last came under common ownership.

Note: Subdivision 960-M shows you how to index amounts.

138-180 Application to pre-common ownership group

(1) You make the adjustment under section 138-170 for all the *CGT assets you have allocated to a pre-common ownership group as if:

(a) they were a single *CGT asset that was *acquired by the originating company on or after 20 September 1985; and

(b) *CGT event A1 had happened in relation to the single asset at the time of the first trigger event for an asset in the group in the income year; and

(c) the *capital proceeds for the trigger event were the sum of the capital proceeds for the CGT events that happened in relation to all of the assets in the group; and

(d) the market value of the single asset were the sum of the market value of each of the assets (as at the time when the originating company and recipient company last came under common ownership).

For allocating assets to a group: see Subdivision 138-E.

(2) In working out what reduction is reasonable for the single asset, you have regard only to the matters set out in subsection 138-175(3).

138-185 Pre-CGT asset acquired after common ownership

(1) You may have to reduce the *cost base and *reduced cost base of *shares you have in, or loans you have to, the originating company under this section if:

(a) *CGT event A1 or B1 happens in relation to a *CGT asset of the originating company; and

(b) the originating company *acquired the asset before 20 September 1985 and after the last time it and the recipient company came under common ownership.

(2) You must have *acquired each share or loan on or after 20 September 1985 and have owned it at the time of the trigger event.

(3) You reduce the *cost base and *reduced cost base of each share or loan by the amount (if any) that is reasonable having regard to:

(a) the circumstances in which you *acquired the share or loan; and

(b) the extent (if any) to which the market value of the share or loan was reduced as a result of the trigger event happening.

 

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