Edited version of private advice

Authorisation Number: 1052429116410

Date of advice: 1 August 2025

Ruling

Subject: Division 615 roll-over

Question 1

Is the Trustee eligible to choose capital gains tax roll-over relief under Division 615 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the transfer of its shares in Company A in exchange for shares in Company B?

Answer 1

Yes.

Question 2

If the answer to Question 1 is Yes, for the purpose of section 615-40 of the ITAA 1997 will any capital gain or capital loss the Trustee makes in relation to the exchange of shares in Company A for shares in Company B be disregarded?

Answer 2

Yes.

This ruling applies for the following period:

Year ending 30 June 20xx

The scheme commenced on:

1 July 20xx

Relevant facts and circumstances

The Trustee owns shares in Company A. Together with a Shareholder they own 100% issued share capital in Company A.

Company A was incorporated in Australia and is the head entity of a tax consolidated group.

All shares in Company A are ordinary shares.

Company A is part of a global group of entities in the retail and wholesale business.

The group proposes to restructure to establish an interposed Company B in a foreign jurisdiction to serve as a centralised geographical holding company.

On incorporation, Company B will issue ordinary shares to the Trustee and the Shareholder in the same proportions as their current share holdings in Company A.

Under the proposed restructure the Trustee and the Shareholder will exchange their shares in Company A for shares in Company B.

Based on the market valuations of Company A and Company B, one share in Company A will be exchanged for 10 shares in Company B.

The shares to be issued by Company B for the exchange are ordinary shares.

The Trustee and the Shareholder will not receive anything else in the exchange other than ordinary shares in Company B.

As a result of the exchange the Trustee and the Shareholder each will hold exactly the same proportion of shares in Company B as they each holds in Company A before the exchange.

The Trustee and the Shareholder will own the shares in Company B from the time they are issued until immediately after the time they both have had their shares in Company A disposed of.

The Trustee has held its shares in Company A on capital account and will make a capital gain on the transfer of its shares in Company A in exchange for shares in Company B and will choose a roll-over under Division 615 of the ITAA 1997.

Company B will make a choice that section 615-65 of the ITAA 1997 applies within the required timeframe prescribed by subsection 615-30(3) of the ITAA 1997.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection104-10(1)

Income Tax Assessment Act 1997 subsection 104-10(3)

Income Tax Assessment Act 1997 subsection 104-10(4)

Income Tax Assessment Act 1997 section 110-25

Income Tax Assessment Act 1997 section 124-10

Income Tax Assessment Act 1997 section 124-15

Income Tax Assessment Act 1997 Division 615

Income Tax Assessment Act 1997 section 615-5

Income Tax Assessment Act 1997 section 615-15

Income Tax Assessment Act 1997 section 615-20

Income Tax Assessment Act 1997 section 615-25

Income Tax Assessment Act 1997 section 615-30

Income Tax Assessment Act 1997 section 615-40

Income Tax Assessment Act 1997 section 615-65

Reasons for decision

CGT event A1 under section 104-10 will happen when the Trustee disposes of its shares in Company A by way of transfer to Company B. The time of the event is when the contract for the disposal is entered into or the change of ownership occurs.

Under Division 615 a member of a company can disregard a capital gain or capital loss from the disposal, redemption or cancellation of a share, as part of a reorganisation of the affairs of the company, where in exchange, the member becomes the owner of new shares in another company.

Division 615 contains several conditions for eligibility to choose roll-over. Relevant for the purpose of this ruling are the following conditions:

a)            paragraph 615-5(1)(a): you are a member of a company (the original entity).

The Trustee is a member of Company A because it owns shares in Company A.

b)            paragraph 615-5(1)(b)): at least two entities (the exchanging members) must own all the shares in the original entity.

The Trustee and the Shareholder own all the shares in Company A.

c)             paragraph 615-5(1)(c)): under a scheme for reorganising its affairs, the exchanging members dispose of all their shares in the original entity to a company (the interposed company) in exchange for shares in the interposed company and nothing else.

The proposed restructure is a scheme for reorganising the affairs of Company A. Under this scheme, the Trustee and the Shareholder will dispose of all their shares in Company A in exchange for shares in Company B and nothing else.

The purpose of the reorganisation is to establish a centralised geographical holding company.

d)            section 615-15: the interposed company must own all the shares in the original entity immediately after all the exchanging members have disposed of their shares in the original entity (the completion time).

Company B will own all the shares in Company A immediately after the Trustee and the Shareholder have disposed of their shares in Company A.

e)            paragraph 615-20(1)(a): immediately after the completion time, each exchanging member must own a whole number of shares in the interposed company.

Immediately after the completion time the Trustee and the Shareholder will each own a whole number of shares in Company B.

f)             paragraph 615-20(1)(b): immediately after the completion time, each exchanging member must own a percentage of the shares in the interposed company that were issued to all the exchanging members of the original entity that is equal to the percentage of the shares in the original entity that the exchanging member owned and disposed of under the scheme.

Immediately after the completion time, the Trustee and the Shareholder will each own a percentage of shares in Company B equal to the percentage of shares they own in Company A.

g)            subsection 615-20(2): the market value ratio tests are satisfied.

The proportional market value of ownership of each of the Trustee and the Shareholder in Company B equals their respective proportional market value of ownership in Company A.

h)            paragraph 615-20(3)(a): the exchanging members are Australian residents at the time the shares in the original entity are disposed of under the scheme.

The Trustee is an Australian resident at the time of the disposal of its shares in Company A.

i)              subsection 615-25(1): the shares issued in the interposed company must not be redeemable shares.

The shares to be issued by Company B are ordinary shares and not redeemable shares.

j)              subsection 615-25(2): the exchanging members must own the shares issued by the interposed company until at least the completion time.

The Trustee and the Shareholder will continue to own their shares in Company B after the completion time.

k)             paragraph 615-25(3)(a): immediately after the completion time, the exchanging members must own all the shares in the interposed company.

The Trustee and the Shareholder will own all the shares in Company B immediately after the completion time.

l)              subsection 615-30(1): the interposed company must choose that section 615-65 applies.

Subsection 615-30(2) does not apply.

Company B will choose that section 615-65 applies within X months after the completion time as required by paragraph 615-30(3)(a).

Accordingly, the Trustee can choose to obtain roll-over under Division 615 for the transfer of its shares in Company A in exchange for shares in Company B.

For the purpose of section 615-40 and subsection 124-10(2), the Trustee can disregard the capital gain made from the disposal of its shares in Company A. Under subsection 124-10(3) the first element of the cost base of each new share in Company B is worked out by reference to the cost base of its shares in Company A.