• Appendix 4: Some major share transactions

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    You can obtain information on key transactions involving major companies and other institutions from our website ato.gov.au. These transactions include mergers, takeovers, demergers, demutualisations, returns of capital, share buy-backs, and declarations by liquidators and administrators that shares are worthless.

    Go to the 'Individuals' menu and choose 'Capital gains tax' from the drop-down menu and you will find this information on the 'Capital gains tax essentials' page under 'Key events for Australian shareholders', for 2007-08 and earlier years.

    Check the website for a list of events that may affect your 2008 tax return.

    The table below contains information on some major transactions that have given rise to a CGT event for many people. Remember to take into account any capital gains or capital losses from these transactions on your tax return for the relevant income year. Also, make sure you record any changes to the cost base of your shares or units. Check the website for a more complete list of events in earlier years. Class rulings can be found at ato.gov.au under the heading 'Rulings, policies & law'.

    If you are affected by a demerger there is a demerger calculator at ato.gov.au/demergers.

    Table 4.1: Major share transactions

    Company

    Details of transaction

    Alinta Ltd

    Acquisition of Alinta Ltd by ES&L Pty Ltd

    In August 2007, Alinta was acquired by ES&L Pty Ltd resulting in a number of tax consequences. For more information, read Class Ruling CR 2007/107 - Income tax: scrip for scrip roll-over: acquisition of Alinta Limited by ES&L Pty Limited.

    AMP Ltd

    Demutualisation

    The acquisition cost for AMP Ltd shares was $10.43 per share and the acquisition date was 20 November 1997.

    Subsequently there have been a number of CGT events that have had tax consequences:

    • the December 2003 demerger of the United Kingdom operations of AMP (referred to as 'HHG')
    • 16 June 2005 return of capital to shareholders of $0.40 per share
    • 19 June 2006 return of capital to shareholders of $0.40 per share
    • 18 June 2007 return of capital to shareholders of $0.40 per share.
     

    Austar United Communications Limited

    Return of capital

    On 1 November 2007 Austar made a return of capital to shareholders of $0.2368 per share.

    Shareholders need to reduce the cost base and reduced cost base of each share by $0.2368. For each share that had a cost base of less than $0.2368, the difference is a capital gain in 2007-08.

    See Class Ruling 2007/90 - Income tax: proposed return of capital: Austar United Communications Limited.

    Coles Group

    Acquisition of Coles Group Ltd by Wesfarmers Limited in scheme of arrangement

    On 23 November 2007 the Coles Group Ltd was acquired by Wesfarmers Ltd under a scheme of arrangement. Coles Group Ltd shareholders could elect one of the following consideration alternatives:

    • maximum shares election, or
    • maximum cash election.

    Shareholders who did not make a valid election receive the standard scheme consideration per Coles Group Ltd share of:

    • $4.00 cash
    • 0.14215 new Wesfarmers ordinary share, and
    • 0.14215 Wesfarmers Partially Protected share (WPP share).

    Coles Group Ltd shareholders who made a valid maximum cash election received per Coles Group share:

    • $9.6118 cash, and
    • 0.14215 Wesfarmers Partially Protected share (WPP share).

    Coles Group Ltd shareholders who made a valid maximum shares election received per Coles Group Ltd share:

    • approximately 0.16854 Wesfarmers ordinary shares
    • 0.14215 Wesfarmers Partially Protected share (WPP share), and
    • approximately $2.9583 cash.

    A Coles shareholder will make a capital gain on the disposal of the Coles shares if the capital proceeds are greater than the cost base. A Coles shareholder will make a capital loss if those capital proceeds are less than the Coles shares' reduced cost base.

    The capital proceeds for the disposal of each Coles share is any case consideration plus the market value of the Wesfarmers share and WPP share on 23 November 2007.

    The market value of the Wesfarmers ordinary share on 23 November 2007 was $41.48. The market value of the WPP share was $41.95.

    The acquisition date of Wesfarmers and WPP shares received in exchange for Coles shares is 23 November 2007.

    The first element of the cost base (and reduced cost base) of the Wesfarmers shares and the WPP shares will be a reasonable portion of the market value of the Coles shares exchanged under the scheme as at 23 November 2007. However, the market value of the Coles Ltd shares must first be reduced by that part of the market value that is reasonably attributable to any cash consideration.

    If a Coles shareholder is eligible for and chooses a scrip-for-scrip rollover, a capital gain from the disposal of their Coles share is disregarded to the extent that the shareholder receives Wesfarmers shares and WPP shares. The capital gain is not disregarded to the extent that the capital proceeds include cash consideration.

    If a Coles shareholder chooses a scrip-for-scrip rollover, the first element of the cost base of a replacement Wesfarmers share and the WPP share will be a reasonable portion of the cost base of the Coles share exchanged for those shares under the scheme. However, the cost base of the Coles share must first be reduced by that part of the cost base that is reasonably attributable to any cash consideration.

    Any capital gain or loss on the disposal of Coles shares acquired before 20 September 1985 is disregarded.

    For more information see Class Ruling CR 2007/114 - Income tax: scrip for scrip: acquisition of Coles Group Limited by Wesfarmers Limited.

    Commonwealth Bank of Australia Ltd

    Public share offer

    The Commonwealth Bank public shares were acquired on 13 July 1996. For shareholders who use the indexation method in calculating their capital gain, they index their first and final instalments from 13 July 1996.

    Foster's Group Limited

    Foster's Group share buy-back - October 2007

    On 15 October 2007, Foster's completed an off-market share buy-back. Shareholders who took part in the buy-back received $5.82 per share, which included a fully franked dividend of $3.99 per share.

    For CGT purposes, shareholders are taken to have received $2.27 per share as the capital proceeds in respect of each share bought back.

    The date the shares were sold under the buy-back was 15 October 2007.

    If the capital proceeds of $2.27 per share were more than the cost base of the share, the difference is a capital gain to the shareholder in 2007-08. If $2.27 was less than the share's reduced cost base, the difference is a capital loss.

    See Class Ruling CR 2007/102 - Income Tax: share buy-back: Foster's Group Ltd.

    Promina Group Ltd

    Merger

    On 20 March 2007 Promina Group Limited merged with Suncorp-Metway Limited.

    Promina ordinary shareholders received $1.80 cash plus 0.2703 of a Suncorp share for each Promina share.

    A CGT event happened as a result of the exchange of Promina shares for shares in Suncorp.

    The capital proceeds for each Promina share was $1.80 plus the market value of 0.2703 Suncorp share on 20 March 2007.

    If shareholders make a capital gain they may choose to apply scrip-for-scrip rollover to the extent they received Suncorp shares in exchange for Promina shares. Scrip-for-scrip rollover is not available for the cash amounts received.

    Telstra Corporation Limited

    Public share offer 3

    On 19 November 2006 the Australian Government conducted a sale of shares in Telstra - the T3 share offer.

    Individual participants were required to pay $2.00 per instalment receipt (IR) with their application. They are liable to pay a final instalment of $1.60 per share on or before 29 May 2008. They have a right to receive one bonus loyalty share for every 25 IRs they hold. Participants who paid the final instalment before 31 March 2008 received a discount on the final instalment but the right to receive 1 bonus loyalty share for every 25 IRs held lapsed.

    You may make a capital gain or loss in respect of your IRs or bonus loyalty share rights if you:

    • prepay your final instalment
    • sell your instalment receipts, or
    • default on payment of your final instalment.

    For CGT purposes the cost base is $3.46 per share, assuming that the final instalment is not prepaid (and therefore does not qualify for a discount). The cost base of each bonus loyalty share right is $3.46, assuming that the final instalment is not prepaid.

    Where you prepay your instalment before 31 March 2008 you will make a capital loss in respect of your bonus loyalty share rights, because they will cease to exist. As you are entitled to one bonus loyalty share right for every 25 IRs you hold, your capital loss will be $3.46 for every 25 IRs that you prepay.

    You make a capital gain or capital loss on your instalment receipts and bonus loyalty share rights if you sell some or all of your instalment receipts before 29 May 2008, depending on your cost base and the amount you received for them.

    See our fact sheet Telstra Corporation Limited Tranche 3 (T3) Instalment Receipts.

    Last modified: 06 Oct 2009QC 27921