Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) There is a direct value shift under a * scheme involving * equity or loan interests in an entity (the target entity ) if:
(a) there is a decrease in the * market value of one or more equity or loan interests in the target entity; and
(b) the decrease is reasonably attributable to one or more things done under the scheme, and occurs at or after the time when that thing, or the first of those things, is done; and
(c) either or both of subsections (2) and (3) are satisfied.
Examples of something done under a scheme are issuing new shares at a * discount, buying back shares or changing the voting rights attached to shares.
(2) One or more * equity or loan interests in the target entity must be issued at a * discount. The issue must be, or must be reasonably attributable to, the thing, or one or more of the things, referred to in paragraph (1)(b). It must also occur at or after the time referred to in that paragraph.
Example: A company runs a family business. There are 2 shares originally issued for $2 each. They are owned by husband and wife. The market value of the shares is much greater (represented by the value of the assets of the company less its liabilities). The company issues one more share for $2 to their son.
Caution is needed in such a situation. The example would result in a large CGT liability for the husband and wife under this Division, because they have shifted 1/3 of the value of their own shares to their son. No such liability would arise if the share had been issued for its market value.
(3) Or, there must be an increase in the * market value of one
or more * equity or loan interests in the target entity. The increase must be
reasonably attributable to the thing, or to one or more of the things,
referred to in paragraph (1)(b). It must also occur at or after the
time referred to in that paragraph.