70BDeduction for loss on disposal or redemption of traditional securities

70B  Deduction for loss on disposal or redemption of traditional securities  (1) Expressions used in this section that are also used in section 26BB have the same meanings in this section as in section 26BB.  (2) Where a taxpayer disposes of a traditional security or a traditional security of a taxpayer is redeemed, the amount of any loss on the disposal or redemption is allowable as a deduction from the assessable income of the taxpayer of the year of income in which the disposal or redemption takes place.  (2A) A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of traditional securities that are:  (a) segregated exempt assets (for the purposes of the Income Tax Assessment Act 1997) of a life assurance company; or  (b) segregated current pension assets (as defined in the Income Tax Assessment Act 1997) of a complying superannuation fund.  (2B) A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of a traditional security if:  (a) the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:  (b) the traditional security was issued on the basis that it will or may convert into ordinary shares in:  (ii) the connected entity.  (2C) A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of a traditional security if:  (a) the disposal or redemption is in exchange for ordinary shares in a company that is neither:  (i) the issuer of the traditional security; nor  (b) in the case of a disposal—the disposal is to:  (c) the traditional security was issued on the basis that it will or may be:  (i) disposed of to the issuer of the traditional security or to the connected entity; or  (ii) redeemed;   in exchange for ordinary shares in the company.  (3) Where the Commissioner, having regard to any connection between the parties to the transaction by which the taxpayer disposed of the traditional security or by which it was redeemed, or by which the taxpayer acquired the traditional security, is satisfied that the parties were not dealing with each other at arm’s length in relation to the transaction, then, for the purposes of determining under subsection (2) the amount of any loss on the disposal or redemption, the consideration for the transaction shall be taken to be:  (a) the amount that might reasonably be expected for the transaction if the parties were independent parties dealing at arm’s length with each other; or  (b) where, for any reason it is not possible or practicable for the Commissioner to ascertain that amount—such amount as the Commissioner determines.  (4) If:  (a) a taxpayer disposes of a traditional security or a traditional security of a taxpayer is redeemed; and  (b) there is a loss on the disposal or redemption; and  (c) in the case of a disposal or redemption of a marketable security:  (i) the taxpayer did not acquire the security in the ordinary course of trading on a securities market; and  (ii) at the time the taxpayer acquired the security, it was not open to the taxpayer to acquire an identical security in the ordinary course of trading on a securities market; and  (d) in the case of a disposal of a marketable security—the disposal did not take place in the ordinary course of trading on a securities market; and  (e) having regard to:  (i) the financial position of the issuer of the security; and  (ii) perceptions of the financial position of the issuer of the security; and  (iii) other relevant matters;   it would be concluded that the disposal or redemption took place for the reason, or for reasons that included the reason, that there was an apprehension or belief that the issuer was, or would be likely to be, unable or unwilling to discharge all liability to pay amounts under the security; a deduction is not allowable to the taxpayer under this section in respect of so much of the amount of the loss as is a loss of capital or a loss of a capital nature.  (5) A reference in this section to the disposal by a taxpayer of a security, or to the redemption of a security of a taxpayer, does not include a reference to the waiver or release by the taxpayer of:  (a) the whole or a part of the debt the subject of the security; or  (b) any other right of the taxpayer under the security.  (6) Subsection (5) does not, by implication, affect the meaning of an expression used in:  (a) a provision of this Act other than this section; or  (b) any other law of the Commonwealth. issuer, in relation to a security at a particular time, means the person who, if the amount or amounts payable under the security were due and payable at that time, would be liable to pay the amount or amounts. marketable security means a traditional security that is covered by paragraph (a) of the definition of security in subsection 159GP(1). securities market means a market, exchange or other place at which, or a facility by means of which, offers to sell, purchase or exchange marketable securities are regularly made or accepted.