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INCOME TAX ASSESSMENT ACT 1997 - SECT 727.850

Consequences of scheme under this Subdivision

  (1)   If:

  (a)   as at the time when a * scheme is entered into, or a later time, an entity (the prospective losing entity ) has * provided, is providing, is to provide, or might provide, one or more economic benefits * in connection with the scheme; and

  (b)   the prospective losing entity is a company or trust (except one listed in section   727 - 125 (about superannuation entities)); and

  (c)   a * realisation event happens to an * equity or loan interest, or to an * indirect equity or loan interest, in the prospective losing entity at a time when no * IVS time for the scheme has yet happened (whether or not one happens later); and

  (d)   apart from this Division, a loss would be * realised for income tax purposes by the realisation event; and

  (e)   because of section   727 - 855, the scheme results in a * presumed indirect value shift affecting the realisation event; and

  (f)   section   727 - 860 (about prospective gaining entities) is satisfied; and

  (g)   no exclusion in Subdivision   727 - C applies to the presumed indirect value shift because of section   727 - 865; and

  (h)   on the assumptions set out in subsection   727 - 865(3), the interest would be an * affected interest in the prospective losing entity;

the loss is reduced by an amount that is reasonable having regard to a reasonable estimate of the amount (if any) by which the scheme has reduced the interest's * market value during the period that ends at the time of the realisation event and started at the later of:

  (i)   when the scheme was entered into; and

  (j)   the time of the last realisation event that happened to the interest.

Note 1:   This Subdivision does not reduce gains from realisation events, but loss reductions under this Subdivision are taken into account in working out:

  gain reductions under Subdivision   727 - G for interests in a gaining entity that are realised after the IVS time for the scheme (see section   727 - 625); or

  uplifts under Subdivision   727 - H in the adjustable values of interests in a gaining entity (see section   727 - 810).

Note 2:   Section   727 - 865 provides for how other provisions of this Division apply for the purposes of this Subdivision.

Further exclusion for certain 95% services indirect value shifts

  (2)   The loss is not reduced if the * presumed indirect value shift is a * 95% services indirect value shift because of subsection   727 - 865(2), unless:

  (a)   the conditions in section   727 - 705 (as applying because of that subsection) are met for the presumed indirect value shift; or

  (b)   the conditions in section   727 - 710, 727 - 715 or 727 - 720 (as applying because of that subsection) are met for the presumed indirect value shift and for the realisation event.


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