ATO flexible on 'single acquirable asset' rules
The Australian Taxation Office (ATO) has indicated that if a share order is executed in two 'parcels' due to market conditions it will still be treated as a single acquirable asset.
According to Self-Managed Super Fund Professionals' Association technical director Peter Burgess, the SMSF industry currently works on the assumption that each parcel is a separate acquirable asset and therefore requires its own limited recourse borrowing arrangement.
At a recent National Tax Liaison Group (NTLG) meeting, the following question was posed to the ATO:
"If an order to purchase identical listed shares in the same company is placed on the ASX but the order is not completely filled at the same time, or is immediately filled but at various share prices, will the resulting parcel of shares be considered a collection of assets for the purpose of a limited recourse borrowing arrangement?"
The ATO responded that as long as the acquisition of a single class of shares was filled within a "reasonably short time", it would treat the acquisition of shares as the acquisition of a single asset for the purposes of s67A.
As for what would consist of a reasonably short time, the ATO said that "regard can be had to the prevailing market conditions".
Burgess said the ATO's comments were mainly directed towards stocks which are quite thinly traded, rather than a stock like BHP.
The ATO's comments are from the draft minutes of this month's National Tax Liaison Group meeting and are subject to change.
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