Income Tax Assessment Act| Apprentice Tax Practitioner Program
Subdivision 138-D—Adjustment of direct interests for CGT events (post-CGT assets)
138-240 What this Subdivision does
This Subdivision adjusts the cost base of shares and loans if the capital proceeds from the trigger event are less than the lesser of the cost base of the relevant asset and its market value.
Operative provisions
138-245 Application of Subdivision
138-250 Pre-conditions for adjustments to your shares
138-255 Pre-conditions for adjustments to your loans
138-260 Reduction rules for shares
138-265 Reduction of cost base of shares
138-270 Reduction of reduced cost base of shares
138-275 Different calculation if more than one class of shares
138-280 Reduction rules for loans
138-285 Reduction of cost base and reduced cost base of loans
138-295 Different calculation if more than one loan
138-300 Application to post-common ownership group
[This is the end of the Guide.]
138-245 Application of Subdivision
(1) There are 3 situations in which this Subdivision may apply to
*shares you have in, or loans you have to, the originating company. This table sets them out and the conditions that apply to each situation.
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When this Subdivision applies |
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This Subdivision can apply in this situation |
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1 |
The trigger event is CGT event A1 or B1 (that happens in relation to the originating company and the recipient company) |
(a) the originating company must have *acquired the asset on or after 20 September 1985; and(b) the *capital proceeds from the event must be less than the lesser of the *cost base of the asset and its market value |
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2 |
The trigger event is CGT event D1 that happens when the originating company creates a *CGT asset in the recipient company |
The *capital proceeds from the event must be less than the market value of the asset |
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3 |
The trigger event is CGT event D2, D3 or F1 that happens when the originating company creates a *CGT asset in the recipient company |
The *capital proceeds from the event must be less than the lesser of the market value of the asset at the time of the event and the expenditure the originating company incurred to create it |
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(2) This Subdivision does not require you to reduce the
*cost base and *reduced cost base of a *share or loan if:(a) the
(b) that cost base and reduced cost base are reduced under Subdivision 138-C.
138-250 Pre-conditions for adjustments to your shares
You make a calculation under this Subdivision for a
*share in the originating company if you *acquired it on or after 20 September 1985 and owned it at the time of the trigger event.138-255 Pre-conditions for adjustments to your loans
You make a calculation under this Subdivision for a loan to the originating company if:
(a) you
(b) one of the requirements in column 2 and one of the requirements in column 3 of this table are satisfied.
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Additional loan requirements |
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One of these requirements is satisfied |
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1 |
you did not deal at arm’s length with the originating company in connection with the loan |
the *cost base or *reduced cost base of one or more shares in the originating company is reduced to nil under section 138-265 or 138-270 |
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2 |
the value of the loan was reduced as a result of the trigger event |
no shares in the originating company were *acquired on or after 20 September 1985 and before the time of the trigger event |
138-260 Reduction rules for shares
(1) You work out the reduction in the
*cost base and *reduced cost base of each *share as at the time just before the time of the trigger event.(2) Work out the factor (the share reduction factor) obtained by dividing the market value of the
*share by the sum of the market values of all of the shares in the originating company that were *acquired on or after 20 September 1985.138-265 Reduction of cost base of shares
(1) The way in which you reduce the
*cost base of your *share depends on the circumstances that gave rise to this Subdivision applying.(2) If this Subdivision applies as mentioned in item 1 in the table in subsection 138-245(1), you reduce the
*cost base of the *share by the amount worked out in this way.Note: Item 1 deals with the case where CGT A1 or B1 happened.
Method statement
Step 1.
Step 2. Reduce the Step 1 amount by the
*capital proceeds from the trigger event.Step 3. Multiply the Step 2 amount by the share reduction factor.
Step 4. The result is the reduction in the
*cost base of the *share.(3) If this Subdivision applies as mentioned in item 2 in the table in subsection 138-245(1), you reduce the
*cost base of the *share by the amount worked out in this way.Note: Item 2 deals with the case where CGT event D1 happened.
Method statement
Step 1.
Step 2. Reduce the Step 1 amount by the
*capital proceeds from the trigger event.Step 3. Multiply the Step 2 amount by the share reduction factor.
Step 4. The result is the reduction in the
*cost base of the *share.(4) If this Subdivision applies as mentioned in item 3 in the table in subsection 138-245(1), you reduce the
*cost base of the *share by the amount worked out in this way.Note: Item 3 deals with the case where CGT event D2, D3 or F1 happened.
Method statement
Step 1.
Step 2. Reduce the Step 1 amount by the
*capital proceeds from the trigger event.Step 3. Multiply the Step 2 amount by the share reduction factor.
Step 4. The result is the reduction in the
*cost base of the *share.138-270 Reduction of reduced cost base of shares
Work out the reduction in the
*reduced cost base in the same way as under section 138-265 except that you use the *reduced cost base rather than the *cost base.138-275 Different calculation if more than one class of shares
(1) However, you do not reduce the
*cost base or *reduced cost base of a *share under section 138-265 or 138-270 if:(a) at the time of the trigger event:
(i) there were 2 or more classes of
(ii) you or another entity owned a share in the originating company that you or the other entity
*acquired before 20 September 1985; and(b) it would be unreasonable to reduce the
*cost base or *reduced cost base of the share under that section.(2) Instead, you reduce the
*cost base and *reduced cost base of the *share by a reasonable amount having regard to:(a) the circumstances in which you
(b) the extent to which its market value was reduced as a result of the trigger event happening.
138-280 Reduction rules for loans
(1) You work out the reduction in the
*cost base and *reduced cost base of each loan described in section 138-255 as at the time just before the time of the trigger event.(2) Work out the factor (the loan reduction factor) obtained by dividing the market value of the loan by the sum of the market values of all of the loans to the originating company that were
*acquired on or after 20 September 1985.138-285 Reduction of cost base and reduced cost base of loans
(1) If section 138-265 or 138-270 has operated to reduce the
*cost base of one or more *shares in the originating company to nil and there is an excess available for reductions, multiply the excess by the loan reduction factor.The result is the reduction in the
*cost base of the loan. The reduction of the *reduced cost base of the loan is worked out similarly.(2) However, if there were no shares on which section 138-265 or 138-270 could operate, the way in which you reduce the
*cost base of your loan depends on the circumstances that gave rise to this Subdivision applying.(3) In that case, you reduce the
*cost base and *reduced cost base of the loan by the amount worked out in the same way as for sections 138-265 and 138-270, except that you use the loan reduction factor rather than the share reduction factor.138-295 Different calculation if more than one loan
(1) However, you do not reduce the
*cost base or *reduced cost base of a loan under section 138-285 if:(a) at the time of the trigger event:
(i) you or another entity owned a share in the originating company that you or the other entity
(ii) you owned another loan to the originating company; or
(iii) another loan to the originating company was owned by a company that was a member of the same
*wholly-owned group at that time or by an individual referred to in paragraph 138-25(1)(b) (about the ultimate beneficial owners); and(b) it would be unreasonable to reduce the
*cost base or *reduced cost base of the loan under that section.(2) Instead, you reduce the
*cost base and *reduced cost base of the loan by a reasonable amount having regard to:(a) the circumstances in which you
(b) the extent to which its market value was reduced as a result of the trigger event happening.
138-300 Application to post-common ownership group
(1) You make the calculation under this Subdivision for all of the
*CGT assets that you have allocated to a post-common ownership group as if:(a) they were a single
(b)
*CGT event A1 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.For allocating assets to a group: see Subdivision 138-E.
(2) In applying a provision of this Subdivision to the single asset that requires using the lesser of the
*cost base or *reduced cost base of the asset and its market value, you make the calculation by adding the lesser amount for each asset in the group.(3) You work out the market value,
*cost base and *reduced cost base of each asset in the group at the time of the first trigger event.
Income Tax Assessment Act| Apprentice Tax Practitioner Program