Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 725.240

  (1)   The CGT consequences for you of a * direct value shift are of one or more of these 3 kinds:

  (a)   there are one or more * taxing events generating a gain for * down interests of which you are an affected owner (see subsection   (2));

  (b)   the * cost base and * reduced cost base of down interests of which you are an * affected owner are reduced (see subsection   (3));

  (c)   the cost base and reduced cost base of * up interests of which you are an affected owner are uplifted (see subsection   (4)).

Note:   If there is a taxing event generating a gain, CGT event K8 happens. See section   104 - 250.

Taxing event generating a gain

  (2)   To work out:

  (a)   whether under the table in section   725 - 245 there is a * taxing event generating a gain for you on a * down interest; and

  (b)   if so, the amount of the gain;

assume that the adjustable value from time to time of that or any other * equity or loan interest in the * target entity is its * cost base.

Note:   For example, for that purpose the question whether the interest has a pre - shift gain or a pre - shift loss is determined on the basis that the interest's adjustable value is its cost base.

Reduction or uplift of cost base and reduced cost base

  (3)   The * cost base and the * reduced cost base of a * down interest are reduced at the * decrease time to the extent that section   725 - 250 provides for the * adjustable value of the interest to be reduced.

  (4)   The * cost base and the * reduced cost base of an * up interest are uplifted at the * increase time to the extent that section   725 - 250 provides for the * adjustable value of the interest to be uplifted.

  (5)   However, the * cost base or * reduced cost base is uplifted only to the extent that the amount of the uplift is still reflected in the * market value of the interest when a later * CGT event happens to the interest.

  (6)   To work out:

  (a)   whether the * cost base or * reduced cost base of the interest is reduced or uplifted; and

  (b)   if so, by how much;

assume that:

  (c)   the adjustable value from time to time of that or any other * equity or loan interest in the * target entity is its cost base or reduced cost base, as appropriate; and

  (d)   if the interest is an * up interest because it was issued at a * discount--the adjustable value of the interest immediately before it was issued was its cost base or reduced cost base, as appropriate, when it was issued.

Note:   For example, for that purpose the question whether the interest has a pre - shift gain or a pre - shift loss is determined on the basis that the interest's adjustable value is its cost base or reduced cost base, as appropriate.

Reductions and uplifts also apply to pre - CGT assets

  (7)   A reduction or uplift occurs regardless of whether the entity that owns the interest * acquired it before, on or after 20   September 1985.