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A demerger involves the restructuring of a corporate or fixed trust group by splitting its operations into two or more entities or groups. Under a demerger the owners of the head entity of the group (that is, the shareholders of the company or unit holders of the trust) acquire a direct interest (shares or units) in an entity that was formerly part of the group.
If you owned interests in a company or fixed trust that is the head entity of a demerger group and you received new interests in the demerged company or trust, you may be entitled to demerger rollover.
Generally, the head entity undertaking the demerger will advise whether you are entitled to rollover but you should seek our advice if you are in any doubt. The Tax Office may have provided advice in the form of a class ruling on a specific demerger confirming that a rollover is available.
Even if you do not choose rollover, you must recalculate the cost base and reduced cost base of each of your original interests in the head entity and your new interests in the demerged entity.
The Tax Office has a demergers calculator to help you make these calculations. We also have other products and information to help you, such as question and answer sheets. You can access these from the demergers homepage on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information').
Last modified: 06 Oct 2009QC 27788