• 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

      Last modified: 03 Feb 2016QC 22770