Private ruling: Division 149 of the Income tax Assessment Act 1997 - CGT status
Published: September 2012
Ruling period: Year ended 30 September 1999 | Year ended 30 September 2004 | Year ended 30 September 2009
Date scheme commenced: 30 September 1999

Ruling: Q1: Is the Commissioner, in accordance with section 149-60 of the Income tax Assessment Act 1997 (ITAA 1997) satisfied that, or think it reasonable to assume that, at the end of the relevant test day, majority underlying interests in the assets were held by ultimate owners who also had majority underlying interest in those assets at late September 1985? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Company A has stated their intention to disclose that there was no change in the majority underlying ownership of shares in the company at the test time. Company A is a public company listed on the Australian Stock Exchange. Subsection 149-55(1) of the ITAA 1997 requires that within 6 months after each test day the entity must give the Commissioner written evidence about the majority underlying interest in the asset at the end of that day. Company A operates under a substituted accounting period. Company A has provided the appropriate information for the test days of 30 September 1999, 30 September 2004 and 30 September 2009. Company A was notified that the Commissioner would exercise the discretion provided under subsection 149-55(1) of the ITAA 1997 and allow an extension of time to lodge the evidence required under this subsection. Information was provided outlining the shareholder percentage in Company A at the relevant dates.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 149-15 | Income Tax Assessment Act 1997 Section 149-55 | Income Tax Assessment Act 1997 Section 149-60 | Income Tax Assessment Act 1997 Section 149-70

Reasons for decision: Summary: Division 149 of the ITAA 1997 provides that a pre-CGT asset of a company will only remain a pre-CGT asset of the company while more than 50% of the underlying interests (the majority underlying interests) in the asset remain unchanged. Subdivision 149-C of the ITAA 1997 sets out when an asset of a public company ceases to be a pre-CGT asset. Majority underlying interests in a CGT asset of a company exist, if ultimate owners have (directly or indirectly) more than 50% of the beneficial interests in the asset and in any ordinary income that may be derived from the asset (subsection 149-15(1) of the ITAA 1997). An underlying interest is a beneficial interest that an ultimate owner has (directly or indirectly) in that asset of that income. Subsection 149-15(3) of the ITAA 1997 states that an ultimate owner includes an individual. Under section 149-55 of the ITAA 1997 a public company within 6 months after a test day, must give to the Commissioner written evidence about majority underlying interests in its pre-CGT assets as at the end of the test day. Under subsection 149-60(1) of the ITAA 1997 the Commissioner must be satisfied on the basis solely of this evidence that at the end of that test date majority underlying interests in these assets were held by ultimate owners, who also had majority underlying interest in them at the end of the starting day. If the Commissioner is so satisfied then the assets do not cease being pre-CGT assets of the company in accordance with subsection 149-60(1) of the ITAA 1997 Subsection 149-60(2) of the ITAA 1997 specifies that the starting date must be a day between 1 July 1985 and 30 June 1986 in relation to which evidence can be given that enables a reasonable approximation of the ultimate owners who had underlying interests in the assets of the company at late September 1985. Under subsection 149-55(2), the test days are: · 30 June 1999 · Five yearly intervals from 30 June 1999 (i.e. 30 June 2004); and · Days when there is abnormal trading in shares or units in the entity. Paragraph 4 of Taxation Ruling TR 2004/7 indicates that entities providing evidence under subsection 149-55(1) of the ITAA 1997 will need to submit the evidence in the form of a private ruling. Company A owned CGT assets that it acquired before late September 1985. Further, as its shares are listed on the Australian Stock Exchange it is therefore a public company. Company A identified both as a number and a percentage, the shareholders and their respective holdings. This evidence indicates that more than 50% of the shares at the first test date were still held by the same shareholders at the preceding test dates. It is accepted that ownership of a share indicates a beneficial interest in that share. Company A has provided sufficient written evidence to demonstrate that the majority underlying interests has been held by the same ultimate owners at both the end of the test day and end of the starting day by reference to the detailed listing of all the ultimate owners of the shares in relation to other individuals and entities, thus satisfying the requirements of subsection 149-60(1) of the ITAA 1997. TR 2004/7 requires the Commissioner to be satisfied if it is more likely than not that more than 50% of the underlying interests in the assets of the public entity were held by the same ultimate owners at the starting day and the test day. Company A has demonstrated that it meets this criterion for the test days of 30 September 1999, 30 September 2004 and 30 September 2009. Therefore in this particular case, the Commissioner is satisfied that, on the written evidence provided, it is more likely than not that majority underlying interest has been maintained by the same ultimate owners at the starting day and the test days.

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