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Does a realisation event happen for the purposes of subsection 170-280(3) of the Income Tax Assessment Act 1997 (ITAA 1997) where the relevant CGT asset is acquired by more than one entity none of which, considered in isolation, acquires a greater than 50% interest in it?

Yes. Where interests in the relevant CGT asset exceeding 50% in total are acquired by more than one entity, that is not excluded by paragraph 170-280(3)(b) of the ITAA 1997, a realisation event is taken to have occurred.

The taxpayer Company P disposed of a CGT asset to its 100% owned subsidiary Company S.

The disposal of the CGT asset resulted in CGT event A1 happening for the purposes of subsection 104-10(1) of the ITAA 1997.

The capital proceeds were less than the asset's reduced cost base and the taxpayer made a capital loss in accordance with subsection 104-10(4) of the ITAA 1997.

Company P and Company S were linked at the time of the CGT event for the purposes of subsection 170-260(2) of the ITAA 1997 so that the capital loss was disregarded pursuant to section 170-270 of the ITAA 1997.

Later, a new event happened and pursuant to section 170-275 of the ITAA 1997, Company P was taken to have made a capital loss equivalent to the capital loss that was previously disregarded pursuant to section 170-270 of the ITAA 1997.

Company P reacquired the CGT asset and a further event occurred pursuant to section 170-280 of the ITAA 1997. Therefore, subsection 170-280(2) provided that Company P was taken not to have made the capital loss previously authorised by section 170-275 of the ITAA 1997.

Company P has now disposed of the relevant CGT asset to two other companies, who have each acquired a 50% interest in it.

For the purposes of paragraph 170-280(3)(b) of the ITAA 1997 neither of the other companies were, at the time of acquiring their interests in the CGT asset part of the same linked group as the originating entity Company P, nor a connected entity or an associate of a connected entity.

Paragraph 170-280(3)(b) of the ITAA 1997 refers to a realisation event where: '...the relevant CGT asset, or a greater than 50% interest in it, is acquired by an entity that is none of the following: i) a member of the linked group of which the originating company is a member, ii) a connected entity of the originating company, iii) an associate of such a connected entity...'

In applying the singular word 'entity' in paragraph 170-280(3)(b) of the ITAA 1997 it is considered that the word entity should also be construed as 'entities' by regard to paragraph 23(b) of the Acts Interpretation Act 1901 which provides that: 'In any Act, unless the contrary intention appears: (a) ... (b) words in the singular number include the plural...'

As paragraph 170-280(3)(b) of the ITAA 1997 applies then, pursuant to subsection 170-280(3) of the ITAA 1997, Company P is taken to have made a capital loss at the time of the realisation event equal to the amount of capital loss that was previously taken not to have been made because of subsection 170-280(2) of the ITAA 1997.