Section EX 68 — Income Tax Act 2007: Measurement of cost

EX 68 Measurement of cost When this section applies (1) This section applies when the cost of a person’s attributing interest in a FIF is being measured for the purposes of— (a) the natural person $50,000 threshold in sections CQ 5(1)(d) or (e) (When FIF income arises) and DN 6(1)(d) or (e) (When FIF loss arises): (b) the comparative value method: (c) the deemed rate of return method: (d) the fair dividend rate method: (e) the cost method. FIFO cost flow identification (2) If sections EX 52(14) and EX 53(16) do not apply and it is not possible to specifically identify the cost of the interest because of multiple acquisitions or dispositions or both by the person, the first-in-first-out (the FIFO ) method of identifying cost flows is applied. Definition of items in formula [Repealed] (3) [Repealed] Share splits or similar (4) If the person acquires the interest as the result of a share split, non-taxable bonus issue, or similar event, and the acquisition is not income for the person, subsections (5) and (6) apply. Allocation of original cost (5) The cost of the interest is a fair allocation, based on market values at the time of the split, of the cost of the original property that is split. Allocation replacing original cost (6) For the income year in which the split occurs and later,— (a) the cost allocated to the interest is no longer the cost of the original property that was split; and (b) the person is treated as having incurred the allocated cost amount on acquiring the interest when the original property was acquired; and (c) the person is treated as not incurring any other cost on the interest merely because the original property ceases to exist. Non-monetary cost (7) If any cost is incurred in kind and not in money, the amount of the cost is equal to the market value of the cost incurred in kind, measured as at the time incurred. Exclusion of term life insurance element of premiums (8) If the interest is rights to benefit under a life insurance policy, the cost of the interest excludes a premium incurred in an earlier income year, or accounting period, to the extent to which the premium relates only to term life insurance for the previous period and does not increase the policy’s surrender value. Exclusion of holding costs (9) The cost of the interest does not include any expenditure under the financial arrangements rules or interest on money borrowed to acquire it, or other holding costs, incurred after its acquisition. Transitional rule: interests acquired before 1 January 2000 (10) Subsection (11) applies, for the purposes of the $50,000 threshold in sections CQ 5(1)(d) or (e) and DN 6(1)(d) or (e) , if— (a) the interest was acquired before 1 January 2000; and (b) the person chooses, for the income year for which the relevant paragraph is applied or an earlier income year, that subsection (11) applies to all interests acquired before 1 January 2000. Cost treated as half 1 April 2007 value (11) Despite subsections (1) to (9), the cost of the interest is treated as equal to half the market value of the interest on 1 April 2007. Optional transitional rule: interests excluded by section EX 39 until 2012–13 income year (12) For interests that were acquired by the person before 1 January 2005 and excluded by section EX 39 from being attributing interests until the beginning of the 2012–13 income year, the person may choose to treat the cost of every interest as being the market value of the interest at the beginning of the 2012–13 income year, for the purposes of the $50,000 threshold in sections CQ 5(1)(d) or (e) and DN 6(1)(d) or (e) . Defined in this Act: accounting period , amount , attributing interest , comparative value method , cost method , deemed rate of return method , fair dividend rate method , FIF , financial arrangements rules , income , income year , interest , life insurance , life insurance policy , market value , non-taxable bonus issue , premium , share , Compare: 2004 No 35 s EX 56 Section EX 68(2) heading: substituted, on 1 April 2008, by section 401 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 68(2): substituted, on 1 April 2008, by section 401 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 68(3) heading: repealed, on 1 April 2008, by section 401 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 68(3): repealed, on 1 April 2008, by section 401 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EX 68(12) heading: inserted (with effect on 1 October 2011), on 2 November 2012 (applying for the 2012–13 and later income years), by section 51(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section EX 68(12): inserted (with effect on 1 October 2011), on 2 November 2012 (applying for the 2012–13 and later income years), by section 51(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).