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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 40 - Capital allowances    View history reference

Subdivision 40-D - Balancing adjustments    View history reference

Commissioner ' s Remedial Power

Note: A Commissioner ' s Remedial Power (CRP 2017/2) is relevant to this part of the tax law. Taxation Administration (Remedial Power - Small Business Restructure Roll-over) Determination 2017 (F2017L01687) modifies the operation of s 40-340 of the Income Tax Assessment Act 1997 and any other provisions of a taxation law whose operation is affected by the modified operation of s 40-340 in relation to an asset transferred under a small business restructure roll-over (item 8 of the table in s 40-340(1) ).

The operation of the relevant provisions is modified as follows:

If s 40-340 of ITAA 1997 provides for rollover relief in relation to a disposal of a depreciating asset because the condition in item 8 of the table in s 40-340(1) of ITAA 1997 is satisfied in relation to the asset, that section has effect as if it also provided that the disposal of the asset has no direct consequences under the income tax law (other than Div 40 of ITAA 1997).

The modification applies in respect of transfers on or after 8 May 2018.

An entity must treat a modification as not applying to it or any other entity if the modification would produce a less favourable result for it. The Commissioner is empowered by s 370-5 of Sch 1 to the Taxation Administration Act 1953 to make modifications, by legislative instrument, to ensure the law is administered to achieve its intended purpose or object.

Operative provisions

SECTION 40-364  Interest realignment adjustments  

 View history reference

Effect of receiving interest realignment adjustment on assessable income

40-364(1)  

If you receive an *interest realignment adjustment in an income year, include in your assessable income for the year an amount (the adjustment amount ) equal to:


(a) the amount of the adjustment; or


(b) if the adjustment is not an amount - the *market value of the adjustment.

Effect of providing interest realignment adjustment on cost, or cost base and reduced cost base

40-364(2)  

If an *interest realignment adjustment is provided by you or on your behalf:


(a) include the adjustment amount in the second element of the *cost of a *mining, quarrying or prospecting right that you acquired under the *interest realignment arrangement to which the adjustment amount relates; or


(b) if this Division does not apply to that right - include the adjustment amount in the *cost base and *reduced cost base of that right.

However, if you acquired more than one such right under the arrangement, apportion the adjustment amount between the costs, or cost bases and reduced cost bases, of those rights on a reasonable basis.

Note:

Subsections 40-77(1D) and (1E) of the Income Tax (Transitional Provisions) Act 1997 set out when this Division does not apply to the right.

Tax effects of the right to an interest realignment adjustment

40-364(3)  

In calculating the *termination value of a *mining, quarrying or prospecting right that you provide under an *interest realignment arrangement, assume to be zero the *market value of any contractual right conferred by the arrangement to an *interest realignment adjustment to be received by you.

40-364(4)  

In calculating the *cost of a *mining, quarrying or prospecting right that you receive under an *interest realignment arrangement, assume to be zero the *market value of any contractual right conferred by the arrangement to an *interest realignment adjustment to be provided by you.

40-364(5)  

The creation of a right to an *interest realignment adjustment does not cause *CGT event D1 or CGT event D3 to happen.

40-364(6)  

Your receipt of an *interest realignment adjustment does not cause *CGT event C2 to happen in relation to the right to receive the adjustment.

Meaning of interest realignment adjustment

40-364(7)  

An interest realignment adjustment is an amount, or an asset (other than a *mining, quarrying or prospecting right), that:


(a) is provided under an *interest realignment arrangement to a party to the arrangement by or on behalf of another party to the arrangement; and


(b) is provided as an adjustment, to the parties ' contributions of value to the project to which the arrangement relates, that arises because information that has become available since the time the arrangement took effect indicates that the other party did not make an appropriate contribution at that time.


 



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