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Scrip for scrip rollover

Last updated 7 July 2015

If a company in which you owned shares was taken over and you received new shares in the takeover company, you may be entitled to a scrip for scrip rollover. You may also be eligible for this rollover if you exchange a unit or other interest in a fixed trust, for a similar interest in another fixed trust.

A scrip for scrip rollover is not available if a share is exchanged for a unit or other interest in a fixed trust, or if a unit or other interest in a fixed trust is exchanged for a share.

You can only choose the rollover if you have made a capital gain from such an exchange on or after 10 December 1999. A rollover does not apply to a capital loss.

A rollover is only available if the exchange is in consequence of an arrangement that results in the acquiring entity (or the wholly owned group of which it is a member) becoming the owner of 80% or more of the original company or trust.

For companies, the arrangement may qualify for the scrip for scrip rollover if:

  • holders of voting interests in the target entity can participate in the merger or takeover on substantially the same terms
  • it includes a takeover bid that does not contravene key provisions in Chapter 6 of the Corporations Act, or
  • if the target entity is a company, it includes a scheme of arrangement approved by a court under Part 5.1 of the Corporations Act.

For trusts, an arrangement may qualify if:

  • all owners of trust voting interests in the original entity or, where there are no voting interests, all owners of units or other fixed interests can participate, or
  • it includes a takeover bid that does not contravene the Corporations Act.

There are special rules if a company or trust has a small number of shareholders or beneficiaries and there is a significant or common stakeholder. If the company or trust does not let you know, you will need to seek information from them about whether these conditions have been satisfied.

The rollover allows you to disregard the capital gain made from the original shares, units or other interest. You are taken to have acquired the replacement shares, units or other interest for the cost base of the original interest.

You can apply the CGT discount when you dispose of new shares providing the combined period that you owned the original shares and the new shares is at least 12 months. The same applies to units in a trust. Note that you have to deduct any capital losses (including unapplied net capital losses from earlier years) from your capital gains before applying the CGT discount.

You may only be eligible for a partial rollover if you exchange shares, units or interests for similar interests in another entity (replacement interest) plus something else, usually cash.

This is because the rollover applies only to the replacement interest. You will need to apportion the cost base of the original interest between the replacement interest and the cash (or other proceeds not eligible for the rollover).

If your original shares, units or other interests were acquired before 20 September 1985 (pre-CGT), you are not eligible for a scrip for scrip rollover. Instead, you acquire the replacement interest at the time of the exchange and the replacement interest is no longer a pre-CGT asset. However, if the arrangement is one that would otherwise qualify for a scrip for scrip rollover, the cost base of the replacement interest is its market value just after the acquisition.

Start of example

Example 27: Partial scrip for scrip rollover

Gunther owns 100 shares in Windsor Ltd, each with a cost base of $9. He accepts a takeover offer from Regal Ltd, which provides for Gunther to receive one Regal share plus $10 cash for each share in Windsor. Gunther receives 100 shares in Regal and $1,000 cash. Just after Gunther is issued shares in Regal, each share is worth $20.

Gunther receives $10 cash for each of his Windsor shares and so has $1,000 to which a rollover does not apply.

In this case, it is reasonable to allocate a portion of the cost base of the original shares having regard to the proportion that the cash bears to the total proceeds. That is:










total proceeds
( cash and value of shares received)


cost base of original shares


proportion of cost base for which cash was received

Gunther’s capital gain is as follows:


(cost base)


(capital gain)

Gunther calculates the cost base of each of his Regal shares as follows:

($900 – $300) ÷ 100 = $6

End of example


Start of example

Example 28: Scrip for scrip rollover

Stephanie owns ordinary shares in Reef Ltd. On 28 February 2015, she accepted a takeover offer from Starfish Ltd, under which she received one ordinary share and one preference share for each Reef share. The market value of the Starfish shares just after Stephanie acquired them was $20 for each ordinary share and $10 for each preference share.

The cost base of each Reef share just before Stephanie ceased to own them was $15.

The offer made by Starfish Ltd satisfied all the requirements for a scrip for scrip rollover.

If the rollover did not apply, Stephanie would have made a capital gain per share of:

(capital proceeds)

(cost base)


(capital gain)

Scrip for scrip rollover allows Stephanie to disregard the capital gain. The cost base of the Starfish shares is the cost base of the Reef Ltd shares.

Apportioning the cost base

As the exchange is one share in Reef Ltd for two shares in Starfish Ltd, Stephanie needs to apportion the cost base of the Reef Ltd share between the ordinary share and the preference share.

Cost base of ordinary share:

$20 ÷ 30 × $15 = $10

Cost base of preference share:

$10 ÷ 30 × $15 = $5

End of example