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INCOME TAX ASSESSMENT ACT 1936

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision A - Assessable income generally  

Archived:

S 25 repealed as inoperative by No 101 of 2006, s 3 and Sch 1 item 52, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive.

SECTION 25A  ASSESSABLE INCOME TO INCLUDE CERTAIN PROFITS  

 View history reference ITAA 97

25A(1A)  

 View history reference
This section does not apply in respect of the sale of property acquired on or after 20 September 1985.

History

S 25A(1A) inserted by No 52 of 1986.

25A(1B)  

 View history reference
This section does not apply to a profit arising in the 1997-98 year of income or a later year of income from the carrying on or carrying out of a profit-making undertaking or scheme, even if the undertaking or scheme was entered into, or began to be carried on or carried out, before the 1997-98 year of income.

Note:

Section 15-15 (Profit-making undertaking or plan) of the Income Tax Assessment Act 1997 deals with such a profit.

History

S 25A(1B) and Note inserted by No 121 of 1997.

25A(1)  

 View history reference
The assessable income of a taxpayer shall include profit arising from the sale by the taxpayer of any property acquired by the taxpayer for the purpose of profit-making by sale, or from the carrying on or carrying out of any profit-making undertaking or scheme.

History

S 25A(1) amended by No 41 of 2011, s 3 and Sch 5 Pt 27, by removing gender-specific language, effective 27 June 2011.

25A(2)  

Subject to subsection (3), where:


(a) after 23 August 1983, a taxpayer sold or sells property (in this subsection referred to as the relevant property) being:


(i) shares in a private company;

(ii) an interest in a partnership; or

(iii) an interest in a private trust estate; and


(b) at the time of sale of the relevant property:


(i) the company, partnership or trustee of the trust estate, as the case may be, held property that:

(A) was acquired for the purpose of profit-making by sale by the company, partnership or trustee, as the case may be; and

(B) was not excepted property of the company, partnership or trust estate, as the case may be; or

(ii) the company, partnership or trustee of the trust estate, as the case may be, held an interest, through one or more interposed companies, partnerships or trusts, in property that:

(A) was acquired for the purpose of profit-making by sale by another private company, partnership or trustee of a private trust estate; and

(B) was not excepted property of that other company, partnership or trust estate, as the case may be;

the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the relevant property for the purpose of profit-making by sale.

25A(3)  

Subsection (2) does not apply in relation to the sale by a taxpayer of property where the Commissioner, having regard to:


(a) the extent to which the assets of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a), immediately before the time of sale, consisted of the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be;


(b) the nature and extent, immediately before the time of sale, of the taxpayer's control of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a) including, in the case of a company, the nature and extent of the taxpayer's shareholding in the company;


(c) the circumstances surrounding any other sale, whether or not by the taxpayer, of shares in the company, or an interest in the partnership or trust estate, as the case may be, referred to in paragraph (2)(a), being a sale at a time when the property of that company, partnership or trust estate included the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be; and


(d) such other matters as the Commissioner considers relevant;

considers that it is not appropriate that that subsection should apply in relation to the sale of the property by the taxpayer.

25A(4)  

Where:


(a) a taxpayer acquired or acquires property, being shares in a company, for the purpose of profit-making by sale; and


(b) after 23 August 1983:


(i) the company issued or issues other shares (in this subsection referred to as the bonus shares) to the taxpayer in satisfaction of a dividend (including an amount debited against an amount standing to the credit of a share premium account) payable to the taxpayer in respect of the shares referred to in paragraph (a); or

(ii) by reason that the taxpayer was the owner of the shares referred to in paragraph (a), the company issued or issues to the taxpayer rights to acquire other shares in the company;

the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the bonus shares or the rights, as the case may be, for the purpose of profit-making by sale.

25A(5)  

Where, after 23 August 1983, property was or is acquired by a taxpayer as a result of a transfer in the prescribed manner by a person who acquired the property for the purpose of profit-making by sale, the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the property for the purpose of profit-making by sale.

25A(6)  

Where:


(a) after 23 August 1983, a taxpayer sold or sells property; and


(b) the property sold was:


(i) an interest in property, being property acquired by the taxpayer for the purpose of profit-making by sale; or

(ii) property, or an interest in property, in which was merged an interest in property, being an interest acquired by the taxpayer for the purpose of profit-making by sale;

the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the property sold for the purpose of profit-making by sale.

25A(7)  

For the purposes of subsection (2), where a company, partnership or trustee of a trust estate holds or held property (in this subsection referred to as the underlying property) consisting of:


(a) an interest in property, being property acquired by the company, partnership or trustee for the purpose of profit-making by sale; or


(b) property, or an interest in property, in which was merged an interest in property, being an interest acquired by the company, partnership or trustee for the purpose of profit-making by sale;

the company, partnership or trustee, as the case may be, shall be deemed to have acquired the underlying property for the purpose of profit-making by sale.

25A(8)  

Where:


(a) property (in this subsection referred to as the acquired property) was or is acquired for the purpose of profit-making by sale; and


(b) after 23 August 1983, property (in this subsection referred to as the transferred property) being:


(i) an interest in the acquired property; or

(ii) property, or an interest in property, in which was merged an interest in the acquired property;
was or is transferred to a taxpayer in the prescribed manner;

the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the transferred property for the purpose of profit-making by sale.

25A(9)  

Where a taxpayer sold or sells property that, by virtue of any of the preceding provisions of this section, is deemed to have been acquired by the taxpayer for the purpose of profit-making by sale, so much (if any) of the proceeds of sale as, in the opinion of the Commissioner, is appropriate shall, for the purposes of this Act, be deemed to be profit arising from the sale by the taxpayer of the property.

25A(10)  

For the purposes of the application of subsection (9) in relation to the sale of property (in this subsection referred to as the relevant property) by a taxpayer:


(a) if:

(i) the relevant property is deemed by subsection (2) to have been acquired by the taxpayer for the purpose of profit-making by sale;

(ii) the property (in this paragraph referred to as the underlying property) to which sub-subparagraph (2)(b)(i)(A) or (2)(b)(ii)(A), as the case may be, applies was actually acquired for the purpose of profit-making by sale by the company, partnership or trustee referred to in that sub-subparagraph (which company, partnership or trustee is in this paragraph referred to as the underlying owner); and

(iii) the relevant property was not transferred to the taxpayer in the prescribed manner;
the Commissioner shall have regard to the extent to which, in the Commissioner's opinion, the proceeds of sale of the relevant property are attributable to the amount of any increase in the value of the underlying property during the period (in this paragraph referred to as the relevant period) when the underlying property was held by the underlying owner and the relevant property was held by the taxpayer reduced by the amount of any capital expenditure incurred by the underlying owner in respect of the underlying property during the relevant period (not including expenditure in respect of which a deduction has been allowed, or is allowable, to the underlying owner);
 View history reference


(b) if the relevant property is deemed by subsection (5) to have been acquired by the taxpayer for the purpose of profit-making by sale and the relevant property was actually acquired for the purpose of profit-making by sale by the person (in this paragraph referred to as the transferor) who transferred the relevant property to the taxpayer in the prescribed manner - the Commissioner shall have regard to the extent to which the amount (if any) that would have been included in the assessable income of the transferor if the transferor had sold the relevant property at the time when it was sold by the taxpayer for an amount of consideration equal to the amount of the consideration received or receivable by the taxpayer in respect of the sale of the relevant property by the taxpayer exceeds the sum of:


(i) any expenditure incurred by the taxpayer in respect of the relevant property, not including:

(A) any consideration given by the taxpayer in respect of the transfer of the relevant property to the taxpayer; or

(B) expenditure to which subparagraph (ii) applies;

(ii) where the taxpayer incurred expenditure of a capital nature in respect of the relevant property otherwise than:

(A) in acquiring property for the purpose of profit-making by sale; or

(B) as part of a profit-making undertaking or scheme;
an amount equal to so much of the consideration received or receivable by the taxpayer in respect of the sale of the relevant property by the taxpayer as exceeds the amount that, in the opinion of the Commissioner, would have been the consideration received or receivable by the taxpayer if the taxpayer had not incurred that capital expenditure; and

(iii) the amount of any profit included in the assessable income of the transferor in respect of the transfer of the relevant property to the taxpayer;


(c) if the relevant property is deemed to have been acquired by the taxpayer by virtue of the application of this section (either directly or indirectly) in relation to property (in this paragraph referred to as the related property) that was actually acquired by the taxpayer or by another person or other persons for the purpose of profit-making by sale - the Commissioner shall have regard to the extent to which the relevant property consists of, or is attributable to, the related property;


(d) if the relevant property consists of rights to acquire shares in a company, being rights that the taxpayer is deemed by subsection (4) to have acquired for the purpose of profit-making by sale - the relevant property shall be deemed to have been acquired by the taxpayer at no cost; and


(e) if the relevant property consists of bonus shares that the taxpayer is deemed by subsection (4) to have acquired for the purpose of profit-making by sale - the cost to the taxpayer of the relevant property shall be ascertained in accordance with section 6BA.

History

S 25A(10) amended by No 41 of 2011, s 3 and Sch 5 Pt 27, by removing gender-specific language, effective 27 June 2011.

25A(11)  

For the purposes of this section, property shall be taken to have been transferred to a person (in this subsection referred to as the transferee) in the prescribed manner if:


(a) the following conditions are satisfied:


(i) the property is transferred by way of gift or for consideration the amount or value of which is less than the amount that, in the opinion of the Commissioner, is the value of the property immediately before the time of transfer;

(ii) the property is transferred otherwise than as a result of:

(A) a will, a codicil or an order of a court that varied or modified the provisions of a will or a codicil; or

(B) an intestacy or an order of a court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate; and

(iii) the Commissioner is satisfied that the transferee and the person who transferred the property were not dealing with each other at arm's length in relation to the transfer of the property; or


(b) the property:

(i) is transferred by way of a distribution of property of a private company or private trust estate made (whether in the course of the winding up of the company or trust estate or otherwise) to the transferee in the transferee's capacity as a shareholder in the company or a beneficiary of the trust estate, as the case may be; and

(ii) is not excepted property of the company or trust estate, as the case may be.
 View history reference

History

S 25A(11) amended by No 41 of 2011, s 3 and Sch 5 Pt 27, by removing gender-specific language, effective 27 June 2011.

25A(12)  

In this section:


(a) a reference to excepted property of a company, partnership or trust estate is a reference to:

(i) trading stock of the company, partnership or trustee; or

(ii) property being plant within the meaning of section 45-40 of the Income Tax Assessment Act 1997 purchased for use by the company, partnership or trustee of the trust estate for the purpose of producing assessable income;
 View history reference


(b) a reference to a private company is a reference to a company other than a company the shares in which are listed for quotation in the official list of a stock exchange in Australia or elsewhere;


(c) a reference to a private trust estate is a reference to a trust estate other than a unit trust the units in which are listed for quotation in the official list of a stock exchange in Australia or elsewhere or are ordinarily available for subscription or purchase by the public; and


(d) a reference to property generally or to a particular kind of property includes a reference to an estate or interest in property or in that kind of property, as the case may be.

History

S 25A(12) amended by No 101 of 2006, s 3 and Sch 2 item 178, by amending repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive.

S 25A inserted by No 47 of 1984.

Archived:

S 25B to 26AAB repealed as inoperative by No 101 of 2006, s 3 and Sch 1 item 53, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive. Remade versions of paragraphs 26(e), (eaa), (ea) and (i), which are repealed by the above item, are included in the Income Tax Assessment Act 1997 s 15-2, 15-70 and 15-75.


 



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