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Example

Last updated 27 June 2011

You acquired a parcel of 3,000 Foster's shares that had a cost base of $15,000 just before the demerger. Under the demerger you received 1,000 shares in Treasury Wine for these 3,000 Foster's shares.

The cost base of your shares after the demerger is calculated as follows:

Foster's

$15,000 x 79.96% = $11,994

The first element of the cost base (and reduced cost base) of each of your 3,000 shares in Foster's is $4.00 ($11,994/3,000).

Treasury Wine

$15,000 x 20.04% = $3,006

The first element of the cost base (and reduced cost base) of each of your 1,000 shares in Treasury Wine is $3.01 ($3,006 /1,000).

Further Information

This example illustrates the cost base calculations using the averaging method. Taxation Determination TD 2006/73 explains that you can use other methods if they are reasonable. For more information, read Demergers: Cost base rules tax determination.

End of further information

Remember that, in working out the cost base (and reduced cost base) just after the demerger, you:

  • need to know the cost base of each of your Foster's shares just before the demerger (taking into account any other CGT events that happened after you acquired the shares but before the demerger if they affect the cost base)
  • do not reduce the cost base of your Foster's shares by the $0.64 per share capital reduction associated with the demerger of Treasury Wine
  • keep these details so that you can work out your capital gains or losses when you dispose of these shares.

6. What happens if I elected to have the Treasury Wine shares I would have received under the demerger sold in the sale facility?

You have made a capital gain if the amount of money you receive by participating in the sale facility is more than the cost base of the Treasury Wine shares you would have received under the demerger. You would have received one Treasury Wine share for every three Foster's shares (rounded up or down to the nearest whole Treasury Wine share).

You have made a capital loss if the reduced cost base of the Treasury Wine shares you would have received under the demerger is more than the amount of money you receive by participating in the sale facility.

The cost base (and reduced cost base) of each Treasury Wine share you would have received under the demerger is 20.04% of the cost base of your Foster's shares just before the demerger, divided by the number of Treasury Wine shares you would have received. You would have received one Treasury Wine share for every three Foster's shares you held on 16 May 2011 (rounded up or down to the nearest whole Treasury Wine share).

7. What happens if I have disposed of some or all of my Foster's or Treasury Wine shares after the demerger?

If you have sold any Foster's or Treasury Wine shares since the demerger, you calculate any capital gain or capital loss using the normal rules. You include the capital gain or capital loss in the calculation of your net capital gain or net capital loss for the year in which they were disposed of.

8. How do I determine my eligibility for the CGT discount in working out my capital gain on Treasury Wine shares?

Even if you do not choose the rollover, for the purposes of determining your eligibility for the CGT discount on the disposal of Treasury Wine shares, you are taken to have acquired them on the date that you acquired, for CGT purposes, your corresponding Foster's shares.

QC24491