ATO Interpretative Decision
ATO ID 2003/775 (Withdrawn)
CGT: Transfer of CGT asset - ending of rights by transfer of asset
FOI status: may be released
||This ATO ID is withdrawn. Guidance on this issue is contained in ATO ID 2003/790 in respect of applying the underlying asset approach when the contractual rights for the purchase of the asset are satisfied.
||This document has changed over time. View its history.
Status of this decision: Decision withdrawn 22 December 2017.
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Does CGT event C2 in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) happen when the taxpayer's statutory rights to acquire an asset are satisfied by the transfer of the asset?
No. CGT event C2 in section 104-25 of the ITAA 1997 does not happen when the taxpayer's statutory rights to acquire an asset are satisfied by the transfer of the asset. It is considered that the real transaction is the acquisition of the underlying CGT asset rather than the ending of the rights which merely facilitate that acquisition.
A body corporate was established under an Act of a State Parliament to conduct research, development and extension activities for a specific industry.
The Parliament wanted the functions of the body corporate to be undertaken by the taxpayer, an industry-controlled company.
Therefore, the Act was amended to provide for the transfer of the assets of the body corporate to the taxpayer.
The assets were subsequently transferred from the body corporate to the taxpayer.
The taxpayer made no payment for the transfer of the assets.
The body corporate was dissolved after the transfer.
Reasons for Decision
By amending the Act to provide for the transfer of a CGT asset, the State created a right and, by definition, the created right was a CGT asset (Taxation Determination TD 1999/77). The subsequent transfer of the asset satisfies the right, and on the face of it, may cause CGT event C2 to happen.
However, many transactions can be broken down into several sub-transactions, each of which might independently attract the operation of the CGT provisions. In such situations, it is relevant for the Commissioner to consider what the real transaction is.
In this case, it is considered that the real transaction is the acquisition of the underlying CGT asset (the property) rather than the ending of the rights that merely facilitated that acquisition. This approach is consistent with the view expressed in Taxation Ruling TR 95/35 regarding compensation receipts and identifying the relevant asset for the purposes of the CGT provisions. In determining what the most relevant asset or transaction is, it is often appropriate to adopt a 'look-through' approach to the transaction or arrangement.
Accordingly, where the change of ownership of a CGT asset occurs pursuant to a statutory right, the CGT provisions of the ITAA 1997 will apply only to the acquisition of the underlying asset and not to the right that merely facilitates the acquisition.
Note: This ATO Interpretative Decision does not address the situation where the taxpayer deals with the rights created under an Act of Parliament before the transfer of the underlying asset. Such dealings are likely to be CGT events.
Date of decision: 7 August 2003
|Year of income:||Year ended 30 June 2003|
Income Tax Assessment Act 1997
Related Public Rulings (including Determinations)
Taxation Ruling TR 95/35
Taxation Determination TD 1999/77
Capital gains tax
CGT events C1-C3 - end of a CGT asset
Siebel/TDMS Reference Number: 3704694; 1-BMRSZUF
Business Line: Small Business/Individual Taxpayers
Date of publication: 29 August 2003