Preamble
Yes.
Division 705 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with setting the tax cost for assets of an entity that joins a consolidated group. An allocable cost amount (ACA) is worked out for the joining entity and, after working out the tax cost setting amounts for retained cost base assets, any remainder of the ACA is allocated to reset cost base assets under section 705-35 of the ITAA 1997. Where there are no reset cost base assets, the remainder of the ACA becomes a CGT loss under event L4: section 104-515 of the ITAA 1997.
Where the sum of the costs of reset cost base assets and the sum of their market values are very small or trifling those assets could be ignored for the purpose of allocating ACA under section 705-35 and for the purpose of applying paragraph 104-515(1)(c).
The Commissioner considers that the situation noted in paragraph 3 is a case for the application of the principle that the law is not concerned with trifles ( de minimis non curat lex ). In Farnell Electronic Components Pty Ltd v. Collector of Customs (1996) 142 ALR 322, Hill J confirmed that the de minimis principle is a principle of statutory interpretation. At page 324, he quoted, with approval, the following passage from Halsbury's Laws of England , 4th ed, vol 44(1), at paragraph 1441: De minimis principle . Unless the contrary intention appears, an enactment by implication imports the principle of legal policy expressed in the maxim de minimis non curat lex (the law does not concern itself with trifling matters); so if an enactment is expressed to apply to matters of a certain description it will not apply where the description is satisfied only to a very small extent.
The principle has been recognised in the application of statutory rules to contracts (for example Shipton, Anderson & Co v. Weil Brothers & Co [1912] 1 KB 574 at 577), to criminal law (for example Williams v. The Queen (1978) 140 CLR 591 at 602) and in a number of income tax cases (for example National Mutual Life Association v. FC of T 70 ATC 4134 at 4137; J Hammond Investments Pty Limited v. FC of T 77 ATC 4311 at 4318; Garrett v. FC of T 82 ATC 4060 at 4065; FC of T v. Elton 90 ATC 4078 at 4082; Industry Research and Development Board v. Unisys Info Services 97 ATC 4848 at 4852).
The Commissioner does not consider that there is any intention to exclude the de minimis principle in the interpretation of sections 705-35 and 104-515. What is de minimis in any particular case would, of course, depend on all the facts and circumstances including the relative cost and value of the relevant assets compared with the ACA of the joining entity.
When the final Determination is issued, it is proposed to apply both before and after its date of issue. However, the Determination will not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).
We invite you to comment on this draft Taxation Determination. Please forward your comments to the contact officer by the due date. Due date: 18 November 2005 Contact officer details have been removed following publication of the final ruling.