Issue
Can CGT event J4 happen to a CGT asset disposed of to a company under Subdivision 124-N of the Income Tax Assessment Act 1997 (ITAA 1997) if the asset is sold by the company during the trust restructuring period?
Decision
No. CGT event J4 cannot happen to a CGT asset disposed of to a company under Subdivision 124-N of the ITAA 1997, that is sold by the company during the trust restructuring period.
Facts
The trustee disposed of all of the CGT assets of a unit trust to a company under trust restructure rollover in Subdivision 124-N of the ITAA 1997.
The last CGT asset was disposed of by the trustee to the company more than 6 months after the transfer of the first CGT asset.
There were no circumstances beyond the control of the trustee which caused the disposal of the last asset to be more than 6 months after the disposal of the first asset. During the trust restructuring period, the company sold a CGT asset it had acquired from the trustee.
Reasons for Decision
Where the transferor (the trustee) and the transferee (the company) have chosen rollover under Subdivision 124-N of the ITAA 1997, and the trust does not end within six months, or, if that is not possible because of circumstances outside the control of the trustee - as soon as practicable after the end of that 6 month period, CGT event J4 (section 104-195 of the ITAA 1997) applies to effectively reverse the effect of the rollover in respect of the CGT assets transferred between these entities.
CGT event J4 does not happen to a CGT asset if the company does not own that asset when the failure to cease to exist occurs (paragraph 104-195(1)(c) of the ITAA 1997). CGT event J4 will happen to other CGT assets disposed of by the trustee to the company under the trust restructuring that are owned by the company at the time of the event.