Income Tax Assessment Act 1997
View history note
Hide history noteThis table sets out the modification to the rules about *cost base and *reduced cost base that happens if you *acquire *shares, or units in a unit trust, by converting a *convertible interest.
| Conversion of a convertible interest | ||
| Item | In this situation: | The modification is... |
| 1 | You *acquire *shares or units in a unit trust by converting a *convertible interest that is a *traditional security. | The first element of the *cost base of the shares or units is the sum of:
(a) the cost base of the convertible interest at the time of conversion; and |
| (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and | ||
| (c) all the amounts to be added under subsection (1A). | ||
| The first element of their *reduced cost base is worked out similarly. | ||
| 2 | You *acquire *shares (except shares acquired under an *employee share scheme) by converting a *convertible interest that is not a *traditional security. | The first element of the *cost base of the shares is the sum of:
(a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and |
| (c) all the amounts to be added under subsection (1A). | ||
| The first element of their *reduced cost base is worked out similarly. | ||
| 3 | You *acquire units in a unit trust by converting a *convertible interest (except one that is a *traditional security) that was issued by the trustee of the unit trust after 28 January 1988. | The first element of the *cost base of the units is the sum of:
(a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and |
| (c) all the amounts to be added under subsection (1A). | ||
| The first element of their *reduced cost base is worked out similarly. |
130-60(1A)
An amount is to be added under this subsection if a *capital gain from the *convertible interest has been reduced under section 118-20 . This is so even though a capital gain that is made on conversion is disregarded under subsection (3). The amount to be added is the amount of the reduction.
Note:
For example, a capital gain made on the conversion under section 118-20 may be reduced because an amount is included in the owner ' s assessable income under subsection 26BB(2) of the Income Tax Assessment Act 1936 (about assessing a gain on disposal or redemption of a traditional security) or section 159GS of that Act (about balancing adjustments on transfer of a qualifying security).
S 130-60(1A) inserted by No 163 of 2001, s 3 and Sch 1 item 29. For application provisions, see note under Div 974 heading.
130-60(1B)
The payment to convert the convertible interest can include giving property (see section 103-5 ).
130-60(2)
You are taken to have *acquired the shares or units when the conversion of the convertible interest happened.
S 130-60(2) amended by No 163 of 2001, s 3 and Sch 1 item 30, by substituting " interest " for " note " . For application provisions, see note under Div 974 heading.
S 130-60(2) amended by No 114 of 2000.
130-60(3)
A *capital gain or *capital loss you make from converting the convertible interest is disregarded.
Note 1:
The conversion of the convertible interest would be an example of CGT event C2 (about a CGT asset ending).
Note 2:
There are transitional rules for some convertible notes: see section 130-60 of the Income Tax (Transitional Provisions) Act 1997 .
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