Income Tax Assessment Act 1997



Division 124 - Replacement-asset roll-overs  

Subdivision 124-M - Scrip for scrip roll-over  

Operative provisions

SECTION 124-780   Replacement of shares  


There is a roll-over if:

(a) an entity (the original interest holder ) exchanges:

(i) a *share (the entity ' s original interest ) in a company (the original entity ) for a share (the holder ' s replacement interest ) in another company; or

(ii) an option, right or similar interest (also the holder ' s original interest ) issued by the original entity that gives the holder an entitlement to acquire a share in the original entity for a similar interest (also the holder ' s replacement interest ) in another company; and

(b) the exchange is in consequence of a single *arrangement that satisfies subsection (2) or (2A); and

(c) the conditions in subsection (3) are satisfied; and

(d) if subsection (4) applies, the conditions in subsection (5) are satisfied.

Note 1:

There are some exceptions: see section 124-795 .

Note 2:

The original interest holder can obtain only a partial roll-over if the capital proceeds for its original interest include something other than its replacement interest: see section 124-790 .

Note 3:

A trustee who gets a roll-over under this Subdivision for an original interest consisting of shares issued as part of a demutualisation may be eligible for a further roll-over under Subdivision 126-E when a beneficiary becomes absolutely entitled to the replacement shares.

Example 1:

You can get a roll-over if you exchange your shares in one entity for shares in another entity or if you exchange options in one entity for options in another entity. You cannot get a roll-over if you exchange options for shares.

Example 2:

Examples of arrangements that could be involved include:

  • • a company takeover, whether or not it is regulated by the Corporations Act 2001 , resulting in a company owning 80% or more of another company ' s shares.
  • • a scheme of arrangement governed by the Corporations Act 2001 that involves a cancellation of some interests in an original entity resulting in another entity owning 80% or more of the interests in the original entity.

  • Conditions for arrangement

    The *arrangement must:

    (a) result in:

    (i) a company (the acquiring entity ) that is not a member of a *wholly-owned group becoming the owner of 80% or more of the *voting shares in the original entity; or

    (ii) a company (also an acquiring entity ) that is a member of such a group increasing the percentage of voting shares that it owns in the original entity, and that company or members of the group becoming the owner of 80% or more of those shares; and

    (b) be one in which at least all owners of *voting shares in the original entity (except a company referred to in paragraph (a)) could participate; and

    (c) be one in which participation was available on substantially the same terms for all of the owners of interests of a particular type in the original entity.

    Note 1:

    The 80% or more requirement is satisfied if the acquiring entity ends up owning at least 80% of the voting shares in the original entity. This may include shares held before the arrangement started.

    Note 2:

    Participation will be on substantially the same terms if, for example, matters such as those referred to in subsections 619(2) and (3) of the Corporations Act 2001 affect the capital proceeds that each participant can receive.

    Conditions for arrangement - takeover bids and arrangements


    The *arrangement must:

    (a) satisfy paragraph (2)(a); and

    (b) be, be part of, or include one or more of the following:

    (i) a takeover bid (within the meaning of the Corporations Act 2001 ) for the original interests by the acquiring entity that is not carried out in contravention of the provisions mentioned in paragraphs 612(a) to (g) of that Act;

    For exemption and modification of provisions by ASIC (and review by the takeovers panel) see Part 6.10 of the Corporations Act 2001 . For Court declarations excusing contraventions see section 1325D of that Act.

    (ii) a compromise or arrangement entered into by the original entity under Part 5.1 of the Corporations Act 2001 , approved by order of a court made for the purposes of paragraph 411(4)(b) of that Act.

    Conditions for roll-over

    The conditions are:

    (a) the original interest holder *acquired its original interest on or after 20 September 1985; and

    (b) apart from the roll-over, it would make a *capital gain from a *CGT event happening in relation to its original interest; and

    (c) its replacement interest is in a company (the replacement entity ) that is:

    (i) the company referred to in subparagraph (2)(a)(i); or

    (ii) in any other case - the *ultimate holding company of the *wholly-owned group; and

    (d) the original interest holder chooses to obtain the roll-over or, if section 124-782 applies to it for the *arrangement, it and the replacement entity jointly choose to obtain the roll-over; and

    (e) if that section applies, the original interest holder informs the replacement entity in writing of the *cost base of its original interest worked out just before a CGT event happened in relation to it; and

    (f) if an acquiring entity is a member of a wholly-owned group - no member of the group issues equity (other than a replacement interest), or owes new debt, under the arrangement:

    (i) to an entity that is not a member of the group; and

    (ii) in relation to the issuing of the replacement interest.

    If the original interest holder also exchanges a CGT asset that it acquired before 20 September 1985, the cost base of any interest received in exchange for it is worked out under section 124-800 .

    Further roll-over conditions in certain cases

    The conditions specified in subsection (5) must be satisfied if the original interest holder and an acquiring entity did not deal with each other at *arm ' s length and:

    (a) neither the original entity nor the replacement entity had at least 300 *members just before the *arrangement started; or

    (b) the original interest holder, the original entity and an acquiring entity were all members of the same *linked group just before that time.


    There are some cases where a company will not be regarded as having 300 members: see section 124-810 .

    The conditions are:

    (a) the *market value of the original interest holder ' s *capital proceeds for the exchange is at least substantially the same as the market value of its original interest; and

    (b) its replacement interest carries the same kind of rights and obligations as those attached to its original interest.


    This section applies to the holder of a Chess Unit of Foreign Security as if the holder held the underlying interests that the unit represents.


    A Chess Unit of Foreign Security is an interest, traded on the stock market operated by ASX Limited, in a foreign share, unit or interest.

    A company is the ultimate holding company of a *wholly-owned group if it is not a *100% subsidiary of another company in the group.


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