The Commissioner has applied for special leave to appeal to the High Court against the decision in Financial Synergy Holdings Pty Ltd v FCT [2016] FCAFC 31. The Full Federal Court had unanimously allowed the taxpayer’s appeal from the decision of Pagone J at first instance [2015] FCA 53.
The taxpayer had to determine the cost base of an asset that had previously been pre-CGT in the hands of the transferor and was deemed to be acquired before 20 September 1985 (so it was a pre-CGT exempt asset) under the relevant rollover provisions (s122-70(3) of the ITAA97). Normally there is no need to determine the cost base of a pre-CGT asset as the loss or gain is exempt from CGT. But the taxpayer had to ‘push down’ its cost base on acquiring the shares for consolidation purposes. The taxpayer used the normal cost base provisions (s110-25(2)(b) of the ITAA97, which called for the taxpayer (head entity) to determine the value of the shares it gave in return for the units it acquired, at the time of acquisition.
His Honour: Pagone J held that the shares had to be valued at the time the head entity was deemed to acquire the units (under the rollover provision). But, with respect, His Honour omitted to consider that the shares (whose value had to be determined) did not exist at 19.9.85 and could not possibly be valued then.
The Full Federal Court reversed this error and now the Commissioner wants to appeal his loss.
[TT summary] [LTN 70, 14/4/16]