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.