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Using the discount method if you sell your shares after the demerger

Last updated 24 February 2020

Where you sell your new interests in the demerged entity after the demerger, you must have owned the those interests for at least 12 months from when you acquired the corresponding original interests in the head entity in order to use the discount method.

Example:

You received BHP Steel Ltd shares under the demerger on 22 July 2002. They related to shares you acquired in BHP Billiton Ltd on 15 August 2001. You can only use the discount method to work out your capital gain on these shares if you disposed of them after 15 August 2002 - that is, more than 12 months after the date you acquired the BHP Billiton shares.

However, you calculate the 12 months from the date of demerger where you:

  • did not choose rollover relief and you received new interests in the demerged entity which relate to pre-CGT interests in the head entity, or
  • acquired your new interests without a CGT event happening to your original interests.
End of example

Example:

You received BHP Steel Ltd shares under the demerger where you calculated the cost base as $3.45 per share (because they related to pre-CGT shares you owned in BHP Billiton Ltd and you did not choose rollover). You can only use the discount method to work out your capital gain on these shares if you dispose of them after 22 July 2003 - that is, more than 12 months after the demerger.

End of example

QC27448