Issue
Where pursuant to section 104-20 of the Income Tax Assessment Act 1997 (ITAA 1997) CGT Event C1 happens to a CGT asset because it is lost, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997?
Decision
Yes. Where CGT event C1 happens to a CGT asset that is lost it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.
Facts
An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant CGT asset to another entity.
The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying, such that a capital loss that would otherwise have been made by the originating company was disregarded under section 170-270 of the ITAA 1997.
Subsequently, the relevant CGT asset was lost, believed stolen, resulting in CGT event C1 happening under section 104-20 of the ITAA 1997.
Reasons for Decision
Where a capital loss (or a deduction or share of a deduction) has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997.
Paragraph 170-275(1)(a) of the ITAA 1997 provides that a new event happens where the 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the ITAA 1997) 'ceases to exist'.
The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997.
Where the other entity referred to in paragraph 170-255(1)(a) of the ITAA 1997 loses the relevant CGT asset such that CGT event C1 in section 104-20 of the ITAA 1997 occurs, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.