Issue
Does section 125-90 of the IncomeTax Assessment Act 1997 (ITAA 1997) provide that the taxpayer, the owner of an original interest acquired before 20 September 1985, has acquired a new interest in a demerged entity before this date where no CGT event happened under a demerger to the original interest?
Decision
No. Section 125-90 of the ITAA 1997 does not provide that the taxpayer has acquired a new interest in a demerged entity before 20 September 1985 where no CGT event happened under a demerger to the original interest acquired before 20 September 1985.
Facts
The taxpayer acquired shares (original interests) in the head entity of a demerger group before 20 September 1985 (pre-CGT).
The taxpayer acquired new shares in the demerged entity under a demerger which satisfied the conditions of the definition of a demerger in section 125-70 of the ITAA 1997.
The circumstances of the demerger were such that no CGT event happened to the taxpayer's original interests.
Reasons for Decision
Section 125-80 of the ITAA 1997 allows capital gains tax (CGT) rollover relief when a CGT event happens to an original interest in an entity under a demerger and a new interest is received in the demerged entity.
However, where a demerger happens to a demerger group and no CGT event happens to a pre-CGT original interest, there is no CGT rollover relief available. Subsection 125-90(2) of the ITAA 1997 does not provide for subsections 125-80(4) to (7) of the ITAA 1997 to treat a new interest acquired in a demerged entity as a pre-CGT interest.
Under these circumstances, the taxpayer is not taken to have acquired their new shares in the demerged entity before 20 September 1985.