Examples of how section 45B of the Income Tax Assessment Act 1936 may apply to demergers

Circumstances and factors covered in the following examples

This document provides further guidance on how section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) may apply to various demerger situations.

Detailed advice on the application of section 45B to demergers is contained in PS LA 2005/21 - Application of section 45B of the ITAA 1936 to demergers.

This document is not intended to change or alter the propositions contained in PS LA 2005/21. Rather, it is intended to provide further clarification in a small to medium enterprise context.

The following examples discuss certain demerger factors and circumstances, which have particular relevance in small to medium enterprises. For convenience, the key factors and circumstances covered in the examples are shown in the following table:

Category	Ex 1	Ex 2	Ex 3	Ex 4	Ex 5	Ex 6	Ex 7	Ex 8	Ex9
Plans to dispose of interests in either demerged or head entity at time of demerger				Yes	Yes	Yes	Yes	Yes	Yes
Succession and estate planning		Yes				Yes		Yes	Yes
Different types of businesses operated within a corporate group	Yes	Yes	Yes					Yes	Yes
Shares acquired post 20 Sept 1985	Yes			Yes	Yes	Yes	Yes	Yes	Yes
Shares acquired pre 20 Sept 1985		Yes	Yes
Shares subject to CGT discount or other concession				Yes	Yes	Yes	Yes	Yes	Yes
Profit accumulations and pattern of distributions				Yes	Yes		Yes	Yes	Yes
Separating family arrangements and/or closely held groups where demergers done for specific shareholders					Yes	Yes	Yes	Yes
Asset protection	Yes	Yes	Yes	Yes				Yes
Employee share schemes	Yes			Yes	Yes				Yes
Management Issues	Yes	Yes		Yes		Yes	Yes	Yes	Yes
Equity raising	Yes		Yes						Yes