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The AAT has held that AP Energy Investments Limited (AP Energy), a Chinese company, is allowed to disregard the capital gain (of $6,017,467) it made on the part disposal of its shares in an Australian company, Abra Mining Limited (Abra), on 3 December 2007, pursuant to s 855-10(1) of Subdivision 855-A of the ITAA 1997.

The AAT's decision turned on whether AP Energy’s membership interest in Abra, as at 3 December 2007, passed the “principal asset test” (PAT) in s 855-30 of ITAA 1997 and, in particular, the “market value” of Abra’s “mining information”, and the resulting residual amount for Abra’s mining rights and the intangible value created by Abra holding both mining information and mining rights.

Specifically, the PAT required that the sum of the market values of Abra’s assets that were “taxable Australian real property” (TARP) had to exceed the sum of the market values of SBM’s assets that were not TARP.

After considering conflicting evidence from valuers, and applying the obiter principles enunciated by Edmonds J in Resource Capital III LP v FCT [2013] FCA 363, the AAT held that Abra did not pass the PAT in s 855-30 of the ITAA 1997 and, as a consequence, AP Energy could disregard its capital gain on the part disposal of its share in Abra on 3 December 2007.

The AAT set aside the Commissioner's objection decision and substituted it with a decision that AP Energy's objection should be allowed in full.

AP Energy Investments Limited and FCT [2013] AATA 626 (AAT, Walsh SM, 2 September 2013).


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