Issue
Does subsection 115-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to change the date of acquisition of a new interest in a demerged entity, if the new interest was acquired without a CGT event happening to an original interest ?
Decision
No. Subsection 115-30(1) of the ITAA 1997 only changes the acquisition date for the purposes of testing for eligibility for the CGT discount for an asset acquired as a result of a replacement-asset rollover. The new interest was not acquired as a result of a CGT event happening to an original interest, and so a replacement-asset rollover does not apply.
Facts
The taxpayer acquired shares in the head entity of a demerger group on 20 September 1990.
On 1 November 2002 the taxpayer acquired shares in a demerged entity as a result of a demerger undertaken by the group.
This acquisition was not the result of a CGT event happening to the taxpayer's shares in the head entity. The taxpayer made a capital gain on 1 December 2002 when the shares in the new entity were sold.
Reasons for Decision
Subsection 115-25(1) of the ITAA 1997 states that a capital gain can only be a discount capital gain where the asset which gave rise to the capital gain was acquired at least twelve months before the relevant CGT event. Table item 2 in subsection 115-30(1) treats a replacement asset, acquired in a replacement-asset rollover, as having been acquired at the time the original asset was acquired.
The table in section 112-115 of the ITAA 1997 lists all replacement-asset rollovers and includes demergers at item 14C, with reference to Division 125 of the ITAA 1997. Paragraph 125-55(1)(d) of the ITAA 1997 in the demerger relief provisions, states that rollover relief can be chosen if a CGT event happens to your original interests and you acquire a new or replacement interest in the demerged entity.
A CGT event did not happen to the taxpayer's shares in the head entity (original interests) as a result of the demerger, and so replacement-asset rollover cannot be chosen. The taxpayer acquired the new shares on 1 November 2002 and table item 2 in subsection 115-30(1) of the ITAA 1997 cannot apply to change this date for the purposes of satisfying the twelve month ownership test for the CGT discount.