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Edited version of your private ruling
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Ruling
Subject: Demerger
Question 1
Will the proposed arrangement satisfy the requirements for demerger relief under Division 125 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer: Yes.
Question 2
Will the capital gain or loss realized by Company H as a result of the demerger be disregarded under section 125-155 of the ITAA 1997?
Answer: Yes.
Question 3
Will the Company H shareholders be eligible for roll-over relief under section 125-55 of the ITAA 1997 in relation to the demerger?
Answer: Yes.
Question 4
Will the first element of the cost base and reduced cost base of the Company S shares acquired by the Company H shareholders under the demerger, be the sum of their original cost bases (just before the demerger) of the Company H shares, apportioned over those Company H and Company S shares on a reasonable basis having regard to the market values (just after the demerger) of the Company H shares and Company S shares, or a reasonable approximation of those market values pursuant to section 125-80(2) and (3) of the ITAA 1997?
Answer: Yes.
Question 5
Will the Commissioner treat any part of the issue of the Company S shares to the Company H shareholders as a demerger dividend that is assessable under section 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) in the hands of the Company H shareholders?
Answer: No.
Question 6
Will the Commissioner make a determination under subsection 45B(3) of the ITAA 1936 that section 45BA of the ITAA 1936 or section 45C of the ITAA 1936 applies to the whole or any part of any benefit provided to the shareholders of Company H?
Answer:
No.
This ruling applies for the following periods:
Financial year ended 30 June 2012.
The scheme commences on:
1 July 2011.
Relevant facts and circumstances
Company H is proposing to demerge its subsidiary Company S.
Company H will provide its shareholders with all of the shares it currently holds in Company S.
Company H holds non-majority interests in some other companies.
Company H and Company S are Australian residents and are not superannuation funds.
A number of commercial reasons have been provided for the demerger.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 6
Income Tax Assessment Act 1936 Section 44.
Income Tax Assessment Act 1936 Section 45B
Income Tax Assessment Act 1936 Section 45BA
Income Tax Assessment Act 1936 Section 45C
Income Tax Assessment Act 1936 Section 177A
Income Tax Assessment Act 1936 Section 177D
Income Tax Assessment Act 1997 Division 110
Income Tax Assessment Act 1997 Division 112
Income Tax Assessment Act 1997 Division 125
Income Tax Assessment Act 1997 Section 125-55
Income Tax Assessment Act 1997 Section 125-65
Income Tax Assessment Act 1997 Section 125-70
Income Tax Assessment Act 1997 Section 125-80
Income Tax Assessment Act 1997 Section 125-155
Income Tax Assessment Act 1997 Section197-50