Edited version of your private ruling

Authorisation Number: 1012001132189

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Ruling

Subject: Capital gains tax - Babcock and Brown Infrastructure Group - stapled securities

Question: Did you make a capital loss on the Babcock and Brown Infrastructure (BBI) recapitalisation?

Answer: Yes.

This ruling applies for the following period

30 June 2010

The scheme commenced on

1 July 2009

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

In 2006 you acquired a number of BBI stapled securities.

You incurred brokerage and costs to acquire these securities.

In 2007, you acquired a number of stapled securities - Security Purchase Plan. You did not incur any brokerage or stamp duty on this transaction.

On 16 November 2009, BBI at the Annual General Meeting undertook a triple stapling by Babcock and Brown Infrastructure Limited (BBIL) distributing in-specie Prime Infrastructure Trust 2 (PIT2) units to all security holders. The PIT2 units have been stapled to existing securities.

The security consolidation involved parcels of 15,000 securities being consolidated into one security. Security holders holding parcels of less than 15,000 securities will cease to be security holders.

As you owned less than 15,000 securities under the consolidation you ceased to be a BBI security holder.

You received a net capital distribution for your securities in November 2009.

Correspondence dated November 2009 from Prime Infrastructure informed you that due to changes made at the Annual General Meeting you ceased to be a security unit holder in BBI.

You have calculated that you have made a capital loss of $X.

You have provided copies of the following documentation to support your application and these documents are to be read with and forms part of your application for the purpose of this ruling:

Tax invoice - Buy Original Confirmation Contract Note

Transaction confirmation statement from BB Infrastructure

CHESS holding Statement from Infrastructure Limited - November 2009

Distribution statement from Babcock and Brown Infrastructure dated November 2009, and

BBI Stapled Security Transaction Confirmation Statement from Prime Infrastructure dated November 2009.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 102-10

Income Tax Assessment Act 1997 Section 102-15

Income Tax Assessment Act 1997 Section 116-20

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

The most common capital gains tax (CGT) event, CGT event A1, occurs when you dispose of a CGT asset and the time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs.

In your situation, a CGT event A1 occurred when you ceased to be a BBI securityholder upon the security consolidation in November 2011, as your securities were disposed of as directed under the Annual General Meeting of BBI.

You make a capital gain if the capital proceeds from the disposal are more than the asset's cost base. You make a capital loss if the capital proceeds are less than the asset's reduced cost base.

In your case, you acquired a number of BBI securities for $X and a number BBI securities for $X a total amount of $X. In November 2009 apart from the dividend received of $X you received no proceeds for the disposal of your BBI securities.

Therefore, you have made a capital loss on the disposal of your BBI securities.

Reduced cost base

When a CGT event happens to a CGT asset and you have not made a capital gain, you need the asset's reduced cost base to work out whether you have made a capital loss.

The elements of the reduced cost base consist of the following five elements:

· money or property given for the asset

· incidental costs of acquiring the CGT asset or that relate to the CGT event

· balancing adjustment amount

· capital costs to increase or preserve the value of your asset or to install or move it, and

· capital costs of preserving or defending your title or rights to your asset.

Note: A receipt of a non-assessable distribution reduces the cost base of the underlying security. You will need to subtract any non-assessable distributions received by you to calculate your capital loss.

If you are unable to utilise your capital loss in a particular financial year, you carry the unused portion of your capital loss over to the next financial year. This loss can be carried forward until such a time that you have made a capital gain which you can offset it against.

Therefore, your carried forward loss is available to be used to offset any future capital gains.