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Impact on members of the demerger group

There are consequence for members of a demerger group that undertakes a demerger.

Last updated 14 February 2018

The consequence for members of a demerger group that undertakes a demerger is:

  • Capital gains or capital losses are disregarded if they arise under the following CGT events happening to the group's interests in the demerged entity:
    • disposal (CGT event A1)
    • cancellation (CGT event C2)
    • ending of an option to acquire a share (CGT event C3), or
    • capital gain made on certain pre-CGT shares or trust interests (CGT event K6).

No other cost base adjustments

If the cost bases have been adjusted under the demerger provisions, no other adjustments are to be made as a result of the demerger (for example, under the general value shifting rules).

GST and demergers

If your corporate group undertakes a demerger which involved making financial supplies for goods and services tax (GST) purposes, you may be subject to a denial of input tax credits on acquisitions to the extent that they relate to the making of those financial supplies. A financial supply for GST purposes in the context of a demerger includes the provision, acquisition or disposal of securities or units in a unit trust.

If you are denied input tax credits on acquisitions that relate to making financial supplies you may still be entitled to a reduced input tax credit on certain acquisitions which are identified as reduced credit acquisitions under the GST regulations.

Information on GST financial supplies is available in a number of GST public rulings located on the ATO Legal Database including: