Income Tax Assessment Act 1936

SCHEDULE 2H - DEMUTUALISATION OF MUTUAL ENTITIES OTHER THAN INSURANCE COMPANIES AND HEALTH INSURERS  

Division 326 - DEMUTUALISATION  

Subdivision 326-G - CGT consequences of disposal of rights or interests resulting from extinguishment of membership rights  

SECTION 326-195   DISPOSAL OF RIGHT TO RECEIVE SHARES IN HOLDING COMPANY  

326-195(1)    
This section applies if:


(a) under the holding company method of demutualisation, or the combined direct and holding company method of demutualisation, of a mutual entity:


(i) the membership rights of an existing member of the entity are extinguished; and

(ii) shares in the demutualised entity are issued to a company (the holding company ); and


(b) as a result of the extinguishment of the rights, the member acquires a right or an interest in a right to have shares in the holding company issued to the member; and


(c) the member disposes of the whole or a part of the right or interest otherwise than by receiving the shares.


326-195(2)    
For the purpose of working out whether the member made a capital gain or capital loss from the disposal, the member is taken to have done the following:


(a) to have paid for the acquisition of the right or interest in the right the amount worked out by using the formula:


Cost of a share or interest   ×   Number of shares


(b) to have paid that amount, and to have acquired the right or interest, on the demutualisation resolution day.

326-195(3)    
In the formula in paragraph (2)(a):

cost of a share or interest
means the amount that would have been taken to have been paid by the member for the acquisition of a share or an interest in a share in the holding company under Subdivisions 326-D , 326-E and 326-F if the disposal had been the disposal of the shares in the holding company to which the right or interest in the right related.

number of shares
means the number of shares in the holding company to which the right or interest in the right related.


326-195(4)    
If the member is a pre-CGT member who did not acquire membership rights in the demutualising entity by disposing of membership rights in another mutual entity, any capital loss made from the disposal before the demutualisation listing day, or, if there is no such day, before the day on which the shares in the holding company were issued, is to be disregarded.


 

Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.