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The ATO has published a Decision Impact Statement  in relation to the decision of the Full Federal Court in National Mutual Life Association of Australia Ltd v FCT [2009] FCAFC 96; 2009 ATC 20-124. The case concerned whether capital expenditure incurred to enhance the value of shares formed part of the reduced cost base under former s 160ZH(3)(c) of the ITAA 1936. The Commissioner accepts the Full Federal Court's interpretation of s 160ZH(3)(c), as it applied to the non-scrip share capital contribution made by the taxpayer in this case.

However, the decision will have limited application as, for CGT events occurring on or after 1 July 2005, the equivalent provisions in the ITAA 1997 have been amended (ss 110-25(5) and 110-55(2)). There is no longer a requirement that the expenditure be reflected in the "state or nature" of the asset at the time of the CGT event in order for the expenditure to be included in the cost base or reduced cost base. TD 2004/2, which expressed a view contrary to that found by the Full Federal Court, has been withdrawn.


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