Document ID: chunk:federal_register_of_legislation:C2014C00749:clause:15_11:p6
Version: federal_register_of_legislation:C2014C00749
Segment Type: clause
Provision Reference: sch 15 cl 11 (pt 6/20)
Character Range: 299319–302091

interest, this Division reduces the amount of the loss or gain (realisation time method). However, a choice can be made to adjust the interest's value for income tax purposes in a way that takes account of the indirect value shift (adjustable value method).
 (2) This Division does not create taxing events giving rise to gains or losses.

727‑15  When does an indirect value shift have consequences under this Division?
 (1) Indirect value shift is defined very broadly, but the application of this Division is limited in various ways.
 (2) The losing entity must be a company or trust (except a superannuation entity). However, the gaining entity can be any kind of entity, including an individual.
 (3) This Division does not apply if entities deal with each other at arm's length, or provide economic benefits in return for full market value.
 (4) The losing entity and the gaining entity must be connected by having had the same ultimate controller. In the case of closely held entities, they may instead be connected by having had a high level of common ownership.
 (5) The only interests affected are those owned by entities involved in the indirect value shift or by their associates.
 (6) There are a range of exclusions, such as:
 (a) exclusions for minor indirect value shifts; and
 (b) a series of rules designed to provide safe harbour treatment for common transactions relating to services; and
 (c) anti‑overlap provisions to prevent double‑counting.
 (7) Rules of thumb are included to make it easier to determine the market value of some kinds of economic benefits.
 (8) To reduce compliance costs for:
 (a) entities in the Simplified Tax System; and
 (b) entities that meet the CGT small business net asset threshold ($5 million);
interests owned by those entities are not affected by this Division.
[The next section is section 727‑25.]

727‑25  Effect of this Division on realisations at a loss that occur before the nature or extent of an indirect value shift can be fully determined
 (1) To determine whether a scheme gives rise to an indirect value shift, it must be possible to identify all the economic benefits under the scheme, and the providers and recipients of those benefits.
 (2) Before then, interests that might be affected by the scheme may be realised at a loss. Subdivision 727‑K contains special rules that apply if that happens.

Subdivision 727‑A—Scope of the indirect value shifting rules

Table of sections
727‑95 Main object
727‑100 When an indirect value shift has consequences under this Division
727‑105 Ultimate controller test
727‑110 Common‑ownership nexus test (if both losing and gaining entities are closely held)
727‑125 No consequences if losing entity is a superannuation entity

727‑95  Main object
  The main object