NEW BUSINESS TAX SYSTEM (TAXATION OF FINANCIAL ARRANGEMENTS) ACT (NO. 1) 2003 NO. 133, 2003 - SCHEDULE 2

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NEW BUSINESS TAX SYSTEM (TAXATION OF FINANCIAL ARRANGEMENTS) ACT (NO. 1) 2003 NO. 133, 2003 - SCHEDULE 2

- Convertible interests

Income Tax Assessment Act 1997

1 Paragraph 122-25(4)(a)

Omit " ^*convertible note", substitute " ^*convertible interest".

2 Paragraph 122-25(4)(b)

Omit "convertible note", substitute "convertible interest".

3 Paragraph 122-135(4)(a)

Omit " ^*convertible note", substitute " ^*convertible interest".

4 Paragraph 122-135(4)(b)

Omit "convertible note", substitute "convertible interest".

5 Paragraph 126-50(3)(a)

Omit " ^*convertible note", substitute " ^*convertible interest".

6 Paragraph 126-50(3)(b)

Omit "convertible note", substitute "convertible interest".

7 Subsection 130-60(1) (table)

Repeal the table, substitute:

Conversion of a convertible interest
Item	In this situation:	The modification is...
1	You ^acquire ^shares or units in a unit trust by converting a ^convertible interest that is a ^traditional security.	The first element of the ^cost base of the shares or units is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their ^reduced cost base is worked out similarly.
2	You ^acquire ^shares (except shares acquired under an ^employee share scheme) by converting a ^convertible interest that is not a ^*traditional security.	The first element of the ^cost base of the shares is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their ^reduced cost base is worked out similarly.
3	You ^acquire units in a unit trust by converting a ^convertible interest (except one that is a ^*traditional security) that was issued by the trustee of the unit trust after 28 January 1988.	The first element of the ^cost base of the units is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their ^reduced cost base is worked out similarly.

8 After subsection 130-60(1A)

Insert:

(1B): The payment to convert the convertible interest can include giving property (see section 103-5).

9 Application of amendments

The amendments made by this Schedule apply to the conversion of a convertible interest on or after 1 July 2001.

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Conversion of a convertible interest
Item	In this situation:	The modification is...
1	You ^acquire ^shares or units in a unit trust by converting a ^convertible interest that is a ^traditional security.	The first element of the ^cost base of the shares or units is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their ^reduced cost base is worked out similarly.
2	You ^acquire ^shares (except shares acquired under an ^employee share scheme) by converting a ^convertible interest that is not a ^*traditional security.	The first element of the ^cost base of the shares is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their ^reduced cost base is worked out similarly.
3	You ^acquire units in a unit trust by converting a ^convertible interest (except one that is a ^*traditional security) that was issued by the trustee of the unit trust after 28 January 1988.	The first element of the ^cost base of the units is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their ^reduced cost base is worked out similarly.