Application of rollover relief to restructures
Julie acquires 1,000 shares in company X under an ESS for $1,000. She deferred declaring her discount as income. Company X is subsequently restructured, with 60% becoming company Y and 40% company Z. Julie is employed by company Y after the restructure. Julie's 1,000 shares in company X which had a market value of $8 at the restructure time are replaced with 1,200 matching shares in company Y which had a market value of $4 at the restructure time and 800 matching shares in company Z which had a market value of $4 at the restructure time.
- employed by company X
- holds 1,000 x $8 shares in company X.
- employed by company Y
- holds 1,200 x $4 shares in company Y.
- holds 800 x $4 shares in company Z.
Julie's tax position after the restructure is:
- the 1,200 matching shares in company Y - rollover relief applies as these shares are treated as if they were a continuation of the 600 shares in company X (60% of the 1,000 shares) and her employment with company Y is treated as a continuation of employment with company X
- the 800 matching shares in company Z - a cessation time or deferred taxing point will occur for the 400 shares in company X (40% of 1,000 shares) because there is no continuation of employment in company X.
As Julie paid $1,000 for the 1,000 shares in company X, Julie will apportion this payment as follows:
End of example
- $600 (60% of $1,000) to the shares in company X that received rollover relief
- $400 (40% of $1,000) to the shares in company X that have a cessation time or deferred taxing point. Julie will include a discount of $2,800 ($4 x 800 shares in company Z less $400) in her assessable income in the income year of the restructure.