Issue
Is rollover relief available under Subdivision 41-A of the Income Tax Assessment Act 1997 (ITAA 1997) where Company A disposes of a unit of plant, acquired after 20 September 1985, to Company B, which is part of the same wholly owned group, and the disposal gives rise to a balancing adjustment deduction under section 42-195 of the ITAA 1997?
Decision
No. The roll-over relief available under Subdivision 41-A of the ITAA 1997 is not available in respect of the disposal of plant that was acquired after 20 September 1985 as the same asset roll-over relief under Subdivision 126-B of the ITAA 1997 is not available to Company A.
Facts
Company A is a member of a wholly-owned group of Australian resident companies that also includes Company B. Company A has a unit of plant that it acquired after 20 September 1985. It disposed of the unit of plant to company B during the income year ended 30 June 2001. The market value of the unit of plant at the time of disposal was $30,000. The undeducted cost of the unit at the time of sale was $50,000. As a result of the disposal Company A becomes entitled to a deduction of $20,000 under section 42-195 of the ITAA 1997.
Reasons for Decision
Subdivision 41-A of the ITAA 1997 provides roll-over relief for the disposal of plant between Australian resident companies within the same wholly-owned group if same asset roll-over is available under Subdivision 126-B of the ITAA 1997.
Same asset roll-over is available under Subdivision 126-B if both companies choose to obtain it and • the company disposing of the asset makes a capital gain or does not make a capital loss and is not entitled to a deduction (subparagraph 126- 55(1)(a)(i) of the ITAA 1997); or • the company disposing of the asset acquired it before 20 September 1985 (subparagraph 126- 55(1)(a)(ii) of the ITAA 1997).
Where assets acquired after 20 September 1985 are transferred between wholly owned Australian companies for an amount less than the undeducted cost, a deduction is available under 42-195 of the ITAA 1997 to the originating company, in this case company A. Accordingly, same asset roll-over is not available.