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INCOME TAX ASSESSMENT ACT 1997 - SECT 116.120

Disposals of assets involving look-through earnout rights

Consequences for capital proceeds

             (1)  If * CGT event A1 happens because you * dispose of a * CGT asset, your * capital proceeds from the disposal:

                     (a)  do not include the value of any * look-through earnout right relating to the CGT asset and the disposal; and

                     (b)  are increased by any * financial benefit that you receive under such a look-through earnout right; and

                     (c)  are reduced by any financial benefit that you provide under such a look-through earnout right.

Remaking choices affected by the look-through earnout right

             (2)  Despite section 103- 25, you may remake any choice you made under this Part or Part 3-3 in relation to the * CGT event if:

                     (a)  you provide or receive a * financial benefit under such a * look-through earnout right; and

                     (b)  you remake the choice at or before the time you are required to lodge your * income tax return for the income year in which the financial benefit is provided or received.

Amending assessments affected by the look-through earnout right

             (3)  The Commissioner may amend an assessment of a * tax-related liability if:

                     (a)  an entity provides or receives a * financial benefit under such a * look-through earnout right; and

                     (b)  the amount of the tax-related liability:

                              (i)  depends on that entity's taxable income for the income year in which the * CGT event happens; or

                             (ii)  is otherwise affected by that right's character as a look-through earnout right; and

                     (c)  the Commissioner makes the amendment before the end of the 4-year period starting at the end of the income year in which the last possible financial benefit becomes or could become due under the look-through earnout right.

The tax-related liability need not be a liability of that entity.

Note:          Subparagraph (b)(ii) covers changes to the amount of that tax-related liability that happen directly or indirectly because of subsection (1) or (2).

             (4)  If at a particular time a right is taken never to have been a * look-through earnout right because of subsection 118-565(2), the Commissioner may amend an assessment of a * tax-related liability for up to 4 years after that time if:

                     (a)  an entity provides or receives a * financial benefit under the right; and

                     (b)  the amount of the tax-related liability:

                              (i)  depends on that entity's taxable income for the income year in which the * CGT event happens; or

                             (ii)  was otherwise affected by that right's character as a look-through earnout right before subsection 118-565(2) applied.

The tax-related liability need not be a liability of that entity.

Note:          Subsection 118-565(2) restricts look-through earnout rights to rights to financial benefits over a period not exceeding 5 years from the end of the income year in which the CGT event happens.

             (5)  If, after providing or receiving a * financial benefit under a right referred to in subsection (3) or (4):

                     (a)  you are dissatisfied with an assessment referred to in that subsection; and

                     (b)  the Commissioner notifies you that the Commissioner has decided under that subsection not to amend your assessment;

you may object against the assessment, to the extent that it does not take account of that right's character (as a * look-through earnout right or not such a right), in the manner set out in Part IVC of the Taxation Administration Act 1953 .

Table of Subdivisions

             Guide to Division 118

118-A   General exemptions

118-B    Main residence

118-D   Insurance and superannuation

118-E    Units in pooled superannuation trusts

118-F    Venture capital investment

118-G   Venture capital: investment by superannuation funds for foreign residents

118-H   Demutualisation of Tower Corporation

118-I     Look-through earnout rights

Guide to Division 118



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