Issue
Does a balancing adjustment event occur, under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997), for a depreciating asset when an incorporated association under the Associations Incorporation Act 1981 (AIA (Qld)) changes its name and takes over an unincorporated association?
Decision
No. A balancing adjustment event does not occur, under paragraph 40-295(1)(a) of the ITAA 1997, for a depreciating asset when the incorporated association changes its name and continues to hold its depreciating assets when it takes over an unincorporated association.
Facts
A is an incorporated association under the AIA (Qld) and B is an unincorporated association.
The members of both A and B agreed to the takeover of B in their special general meetings.
A changed its name to adopt B's name. The amended constitution of A provides for A to take over B's assets and liabilities.
The voting members and board members of A and B are the same persons.
Paragraph 42-1(a) of the AIA (Qld) provides that a change of name of an incorporated association does not affect its legal personality or identity.
Reasons for Decision
Paragraph 40-295(1)(a) of the ITAA 1997 provides that a balancing adjustment event occurs for a depreciating asset if an entity stops holding the asset. A holder of an asset in any particular circumstance is set out in section 40-40 of the ITAA 1997. A owns the depreciating assets and is a holder of them pursuant to Item 10 of the table in section 40-40 of the ITAA 1997.
A changed its name to B and takes over B. Paragraph 42(1)(a) of Division 3 of the AIA (Qld) provides that a change of name of an incorporated association does not affect its legal personality or identity. Therefore, A under B's name continues as the same continuing entity as before the name change. A also continues to hold its depreciating assets as no transfer of assets is made to another entity after the name change and takeover of B. Therefore, no balancing adjustment event arises for A.