Edited version of your written advice

Authorisation Number: 1013019735882

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This edited version has been found to be misleading or incorrect. It does not represent the ATO’s view of the relevant law.

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Date of advice: 18 May 2016

Ruling

Subject: Capital gains tax roll-overs

Question 1

Will the Foundation Shareholders and the Venture Capital Limited Partnership ('VCLP') Partners qualify for roll-over relief pursuant to Division 615 of the Income Tax Assessment Act 1997 ('ITAA 1997'), in respect of the proposed disposal of their units in the UT in consideration for receiving shares in a newly incorporated company ('UT NewCo') as a result of step 2 of the Proposed Restructure?

Answer

Yes

Question 2

To the extent that the Foundation Shareholders and the VCLP Partners qualify for roll-over relief under Question 1 and the requisite elections are made, will the cost bases of their respective newly acquired shares in UT NewCo to be equal to the cost bases of their existing units in the UT?

Answer

Yes

Question 3

To the extent the Foundation Shareholders and the VCLP Partners qualify for roll-over relief under Question 1 and the requisite elections are made, will the acquisition date of their newly acquired shares in UT NewCo be deemed to be the same as the acquisition date of their respective units in the UT?

Answer

Yes

Question 4

To the extent the Foundation Shareholders and the VCLP Partners qualify for roll-over relief under Question 1, is UT NewCo's cost base of the units it acquired in UT equal to the cost base of UT's assets acquired after 20 September 1985 less the liabilities in respect of those assets?

Answer

Yes

Question 5

Will the Foundation Shareholders and the VCLP Partners qualify for roll-over relief, pursuant to Subdivision 124-M of the ITAA 1997, in respect of the proposed disposal of their shares in UT NewCo in consideration for receiving shares in InternationalCo as a result of step 3 of the proposed restructure?

Answer

Yes

Question 6

To the extent the Foundation Shareholders and the VCLP Partners qualify for roll-over relief under Question 5 and the requisite elections are made, will the cost bases of their newly acquired shares in InternationalCo be equal to the cost bases of their shares in UT NewCo?

Answer

Yes

Question 7

To the extent the Foundation Shareholders and the VCLP Partners qualify for roll-over relief under Question 5 and the requisite elections are made, will the acquisition date of their newly acquired shares in InternationalCo be deemed to be the same as the acquisition date of their respective shares in UT NewCo?

Answer

Yes

Question 8

To the extent the Foundation Shareholders and the VCLP Partners qualify for roll-over relief under Question 5, will InternationalCo's cost base in the shares it holds in UT NewCo be:

i. In respect of the shares it acquires from the Foundation Shareholders, an amount equal to these shareholders historic cost base, and

ii. In respect of the shares it acquires from Non-resident Investor ('NRI'), an amount equal to the market value of shares issued to NRI?

Answer

Yes

Question 9

Will the Foundation Shareholders, the VCLP Partners and the Managed Investment Trust ('MIT') qualify for roll-over relief, pursuant to Subdivision 124-M of the ITAA 1997, in respect of the proposed disposal of their shares in InternationalCo in consideration for receiving shares in HeadCo as a result of step 4 of the Proposed Restructure?

Answer

Yes

Question 10

To the extent the Foundation Shareholders, the VCLP Partners and the MIT qualify for roll-over relief under Question 9 and the requisite elections are made, will the cost bases of their respective shares acquired in HeadCo be equal to the cost bases of their shares in InternationalCo?

Answer

Yes

Question 11

To the extent the Foundation Shareholders, the VCLP Partners and the MIT qualify for roll-over relief under Question 9 and the requisite elections are made, will the acquisition date of their newly acquired shares in HeadCo be deemed to be the same as the acquisition date for their respective shares in InternationalCo?

Answer

Yes

Question 12

To the extent the Foundation Shareholders, the VCLP Partners and the MIT qualify for roll-over relief under Question 9, will HeadCo's cost base in the shares it holds in InternationalCo be:

i. In respect of the shares it acquires from the Foundation Shareholders and the MIT, an amount equal to these shareholders' historic cost bases; and

ii. In respect of the shares it acquires from NRI, an amount equal to the market value of shares issued to NRI?

Answer

Yes

Question 13

Will the Foundation Shareholders, the VCLP Partners and the MIT qualify for roll-over relief, pursuant to Division 615 of the ITAA 1997, in respect of the proposed disposal of their shares in HeadCo in consideration for receiving shares in HoldingCo as a result of step 6 of the proposed restructure?

Answer

Yes

Question 14

To the extent the Foundation Shareholders, the VCLP Partners and the MIT qualify for roll-over relief under Question 13 and the requisite elections are made, will the cost base of their respective newly acquired shares in HoldingCo be equal to the cost base of their shares in HeadCo?

Answer

Yes

Question 15

To the extent the Foundation Shareholders, the VCLP Partners and the MIT qualify for roll-over relief under Question 13 and the requisite elections are made, will the acquisition date of their newly acquired shares in HoldingCo be deemed to be the same as the acquisition date for their respective shares in HeadCo?

Answer

Yes

Question 16

Will the HeadCo tax consolidated group be deconsolidated as a result of HoldingCo becoming the head entity of the Australian tax consolidated group?

Answer

No

This ruling applies for the following periods:

1 July 201X to 30 June 201Y

The scheme commences on:

1 July 201X

Relevant facts and circumstances

The group in Australia includes the following entities:

i. HeadCo,

ii. The Unit Trust ('UT'),

iii. InternationalCo, and

iv. TrusteeCo.

HeadCo and InternationalCo have several foreign subsidiaries.

TrusteeCo is the trustee company for UT.

All of the Australian entities have the same common ultimate shareholders/beneficiaries and in the same proportion.

The shareholding in the HeadCo Group is collectively held by 3 main groups: the Foundation Shareholders, a non-resident investor ('NRI') and the Venture Capital shareholders.

The Foundation Shareholders includes various trusts and executive shareholders. These shareholders are all Australian residents and include the founding shareholders of the HeadCo Group.

The Venture Capital shareholders include a Managed Investment Trust ('MIT') and a Venture Capital Limited Partnership ('VCLP'). The MIT holds shares in InternationalCo. The VCLP holds shares in HeadCo and TrusteeCo and units in UT. Both the MIT and the VCLP are Australian residents. All of the partners in the VCLP are also unitholders in the MIT, and vice versa. All of the partners are Australian residents for income tax purposes.

The NRI holds 40% of the ordinary shares/units in each entity in the HeadCo Group as appropriate. The NRI is not subject to the ruling application.

Group History

The VCLP and the MIT acquired their respective interests in the HeadCo Group from the Foundation Shareholders.

The NRI then acquired their shares and units in the HeadCo Group proportionately from each shareholder/unit holder.

All entities acquired their shares and units in the HeadCo Group entities after 20 September 1985.

Proposed Restructure

The Proposed Restructure involves the following key steps:

Step 1: The shareholders of TrusteeCo sell their shares in TrusteeCo to InternationalCo for $1.

Step 2: UT NewCo is incorporated. Each unitholder in UT exchanges their units for ordinary shares in UT NewCo.

Step 3: Shareholders in UT NewCo exchange all of their shares in UT NewCo for shares in InternationalCo. The shares in InternationalCo will have substantially the same market value and rights as shares in UT NewCo.

Step 4: Shareholders in InternationalCo exchange all of their shares in InternationalCo for shares in HeadCo. The shares in HeadCo will have substantially the same market value and rights as shares in InternationalCo.

Step 5: HeadCo and its wholly owned Australian subsidiaries form an Australian tax consolidated group.

Step 6: HoldingCo is incorporated. Shareholders in HeadCo exchange all of their shares in HeadCo for ordinary shares in HoldingCo.

Relevant legislative provisions

Income Tax Assessment Act 1936 - section 94D,

Income Tax Assessment Act 1997 - section 110-25,

Income Tax Assessment Act 1997 - section 112-115,

Income Tax Assessment Act 1997 - section 115-30,

Income Tax Assessment Act 1997 - section 124-15,

Income Tax Assessment Act 1997 - section 124-780,

Income Tax Assessment Act 1997 - section 124-782,

Income Tax Assessment Act 1997 - section 124-783,

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,

Income Tax Assessment Act 1997 - section 960-130, and

Income Tax Assessment Act 1997 - section 970-500.

Reasons for decision

Issue 1

Question 1

Summary

The Foundation Shareholders and the VCLP Partners can obtain roll-over relief under Division 615 of the Income Tax Assessment Act 1997 ('ITAA 1997') in respect of the proposed disposal of their units in UT for shares in UT NewCo in step 2 of the Proposed Restructure.

Detailed reasoning

Under Division 615 of the ITAA 1997, taxpayer can choose to obtain roll-over in section 615-5 when all the requirements in that section are satisfied.

All the Foundation Shareholders are unit holders in UT. Therefore they are members of UT under item 3 of subsection 960-130(1).

In relation to the VCLP, under section 94D of the Income Tax Assessment Act 1936, it is not a corporate limited partnership and is taxed as an ordinary partnership. Assets of the VCLP are held jointly by the partners of the partnership. Therefore all VCLP Partners are members of UT under subsection 960-130(2). The requirement in paragraph 615-5(1)(a) is satisfied.

All the units in UT are held by the Foundation Shareholders, the VCLP Partners and the NRI and under the proposed transaction all unitholders receive shares in UT NewCo in exchange for their units in UT. The requirements in paragraphs 615-5(1)(b) and (c) are satisfied.

At the end of step 2 of the Proposed Restructure, UT NewCo will hold all the units in UT. Section 615-15 is satisfied.

Each unitholder in UT will receive a whole number of shares in UT NewCo in proportion to their holding in UT. The requirements in subsection 615-20(1) are satisfied. Furthermore, as the shareholding in UT NewCo will be in proportion with the holding in UT, the requirements in subsection 615-20(2) will also be satisfied.

As the taxpayers seeking the roll-over relief, the Foundation Shareholders and the VCLP Partners, are all Australian residents, the requirement in subsection 615-20(3) are satisfied.

In relation to step 2 of the Proposed Restructure, UT unitholders will receive ordinary shares in UT NewCo in exchange for their units. All shares in UT NewCo will be held by UT unitholders until completion of step 2. The requirements in section 615-25 will be satisfied.

UT NewCo will choose to apply section 615-65 within 2 months of completion time. The requirement in section 615-30 is satisfied.

UT NewCo will satisfy all the requirements in Subdivision 615-B. Paragraph 615-5(1)(d) is satisfied.

As all the requirements in subsection 615-5(1) are satisfied, the Foundation Shareholders and the VCLP Partners can choose to obtain the roll-over under Division 615.

Question 2

Summary

The Foundation Shareholders and the VCLP Partners will have the cost base of their newly acquired shares in UT NewCo equal to the cost base of their existing units in UT.

Detailed reasoning

Section 615-40 directs us to Subdivision 124-A of the ITAA 1997 for CGT consequences when electing to apply a roll-over under Division 615.

As the Foundation Shareholders and the VCLP Partners are disposing more than 1 unit in UT and receiving more than 1 share in UT NewCo, the relevant section in Subdivision 124-A is section 124-15.

As the units in UT were acquired after 20 September 1985, the cost base for each newly acquired share in UT NewCo is calculated under subsection 124-15(3). The total of the cost bases of all the newly acquired shares in UT NewCo will be equal to the total of the cost bases of all the original units in UT.

Question 3

Summary

The Foundation Shareholders and the VCLP Partners will have the acquisition date of their newly acquired shares in UT NewCo deemed to be the same as the acquisition date of their respective units in UT.

Detailed reasoning

The Foundation Shareholders and the VCLP Partners can obtain roll-over relief under Division 615 for the exchange of their units in UT for shares in UT NewCo. This roll-over is a replacement roll-over under item 14E of the table in section 112-115 of the ITAA 1997.

As the roll-over is a replacement-asset roll-over, item 2 of the table in subsection 115-30(1) confirms that, for the Foundation Shareholders and the VCLP Partners, the acquisition date for the shares in UT NewCo will be deemed to be the same as the acquisition date of the units in UT.

Question 4

As UT NewCo will make an election under subsection 615-30(1) to apply section 615-65, its cost base of the units in UT will be calculated in accordance with subsection 615-65(4).

Question 5

Summary

The Foundation Shareholders and the VCLP Partners can obtain roll-over relief under Subdivision 124-M of the ITAA 1997 for the exchange of shares in UT NewCo for shares in InternationalCo in step 3 of the Proposed Restructure.

Detailed reasoning

The Foundation Shareholders and the VCLP Partners may qualify for roll-over relief for the share exchange in step 3 in the Proposed Restructure if the requirements in subsection 124-780(1) are satisfied.

The relevant shareholders are exchanging their shares in UT NewCo for shares in InternationalCo. Subparagraph 124-780(1)(a)(i) is satisfied.

InternationalCo holds 100% of issued shares in its foreign subsidiaries in four overseas countries. InternationalCo is a member of a wholly-owned group under the definition in section 975-500.

At the beginning of step 3, InternationalCo has no holding in UT NewCo. At the end of step 3, it has 100% of issued shares in UT NewCo. Applying the ATO's view as set out in Tax Determination TD 2000/51, InternationalCo has increased its shareholding in UT Newco from a starting point of zero to 100%. Subparagraph 124-780(2)(a)(ii) is satisfied.

The exchange of share in step 3 is open on the same terms to all shareholders of UT NewCo. Subparagraphs 124-780(2)(b) and (c) are satisfied. The arrangement satisfies subsection 124-780(2).

Therefore, the requirement in paragraph 124-780(1)(b) is satisfied.

Under section 115-30, the Foundation Shareholders and the VCLP Partners are deemed to have acquired the shares in UT NewCo on the acquisition date of the units in UT. As such, those shares were acquired after 20 September 1985.

The Foundation Shareholders and the VCLP Partners will realise a capital gain on the disposal of their shares in UT NewCo, but for the roll-over.

The shareholders received replacement interest that is shares in InternationalCo. InternationalCo is not a 100% subsidiary of any company. It is the ultimate holding company of the wholly-owned group.

The Foundation Shareholders and the VCLP Partners will choose to apply the roll-over. Should section 124-782 apply, this choice will be made jointly with InternationalCo and the Foundation Shareholders and VCLP Partners will also notify InternationalCo of their historical cost in UT NewCo. Therefore, subsection 124-780(3) is satisfied.

As the shares that the Foundation Shareholders and the VCLP Partners receive in InternationalCo are substantially the same market value and rights as their shares in UT NewCo, subsections 124-780(4) and (5) are satisfied

The requirements in subsection 124-780(1) are satisfied. The Foundation Shareholders and VCLP Partners can choose to apply the roll-over under Subdivision 124-M.

Question 6

Summary

The Foundation Shareholders and the VCLP Partners will have the cost base of their newly acquired shares in InternationalCo equal to the cost base of their existing shares in UT NewCo.

Detailed reasoning

Subdivision 124-A provides the CGT consequences for applying the roll-over provisions in Subdivision 124-M.

As the Foundation Shareholders and the VCLP Partners are disposing more than 1 share in UT NewCo and receiving more than 1 share in InternationalCo, the relevant section in Subdivision 124-A is section 124-15.

As the shares in UT NewCo were acquired after 20 September 1985, the cost base for each newly acquired share in InternationalCo is calculated under subsection 124-15(3). The total of the cost bases of all the newly acquired shares in InternationalCo will be equal to the total of the cost bases of all the original shares in UT NewCo.

Question 7

Summary

The Foundation Shareholders and the VCLP Partners will have the acquisition date of their newly acquired shares in InternationalCo deemed to be the same as the acquisition date of their respective shares in UT NewCo.

Detailed reasoning

The Foundation Shareholders and the VCLP Partners can obtain roll-over relief under Subdivision 124-M for the exchange of their shares in UT NewCo for shares in InternationalCo. This roll-over is a replacement roll-over under item 14A of the table in section 112-115 of the ITAA 1997.

As the roll-over is a replacement-asset roll-over, item 2 of the table in subsection 115-30(1) confirms that, for the Foundation Shareholders and the VCLP Partners, the acquisition date for the shares in InternationalCo will be deemed to be the same as the acquisition date of the shares in UT NewCo.

Question 8

Summary

InternationalCo's cost base for UT NewCo shares it acquired from the Foundation Shareholders and VCLP Partners is an amount equal to those shareholder's historic cost base.

InternationalCo's cost base for UT NewCo shares it acquired from the NRI is an amount equal to the market value of shares issued to NRI.

Detailed reasoning

As the Foundation Shareholders and the VCLP Partners can obtain roll-over relief under Subdivision 124-M for the exchange of shares in step 3 of the proposed restructure, the rule regarding cost base in section 124-782 may be applicable to shares acquired by InternationalCo.

The Foundation Shareholders, the VCLP Partners and the NRI together hold 100% of shares in UT NewCo before step 3. From this shareholding, they together have 100% of voting rights, right to receive dividends and right to receive distribution of capital from UT NewCo.

At the completion of step 3, the Foundation Shareholders, the VCLP Partners and the NRI also hold 100% of shares in InternationalCo.

The Foundation Shareholders, the VCLP Partners and the NRI are common stakeholders under the definition in section 124-783.

As the Foundation Shareholders and the VCLP Partners choose to obtain the roll-over relief, the requirements in subsection 124-782(1) are satisfied.

Therefore, InternationalCo's cost base of its shares in UT NewCo, obtained from the Foundation Shareholders and VCLP Partners, will be equal to the Foundation Shareholders' and the VCLP Partners' historical cost base.

In relation to the UT NewCo shares that InternationalCo obtained from the NRI, as the NRI is not obtaining the roll-over relief, section 124-782 is not applicable. Instead, the normal cost base rules in Division 110 apply.

Under section 110-25, the cost base for InternationalCo for shares in UT NewCo obtained from the NRI will be the market value of shares issued by InternationalCo in exchange for the NRI's UT NewCo shares.

Question 9

Summary

The Foundation Shareholders, the VCLP Partners and the MIT can obtain roll-over relief under Subdivision 124-M of the ITAA 1997 for the exchange of shares in InternationalCo for shares in HeadCo in step 4 of the Proposed Restructure.

Detailed reasoning

The Foundation Shareholders, the VCLP Partners and the MIT may qualify for roll-over relief for the share exchange in step 4 in the Proposed Restructure if the requirements in subsection 124-780(1) are satisfied.

The relevant shareholders are exchanging their shares in InternationalCo for shares in HeadCo. Subparagraph 124-780(1)(a)(i) is satisfied.

HeadCo holds 100% of issued shares in its subsidiary in foreign country. HeadCo is a member of a wholly-owned group under the definition in section 975-500.

At the beginning of step 4, HeadCo has no holding in InternationalCo. At the end of step 4, it has 100% of issued shares in InternationalCo. HeadCo has increased its holding in InternationalCo from a starting point of zero to 100%. Subparagraph 124-780(2)(a)(ii) is satisfied.

The exchange of shares in step 4 is open on the same terms to all shareholders of InternationalCo. Subparagraphs 124-780(2)(b) and (c) are satisfied.

As the arrangement satisfies subsection 124-780(2), the requirement in paragraph 124-780(1)(b) is satisfied.

The Foundation Shareholders and the MIT acquired the shares in InternationalCo after 20 September 1985.

Furthermore under section 115-30, the Foundation Shareholders and the VCLP Partners are deemed to have acquired a parcel of shares in InternationalCo on the acquisition date of the units in UT NewCo as a result of step 3 of the Proposed Restructure.

As such, all shares held by the Foundation Shareholders, the VCLP Partners and the MIT were acquired after 20 September 1985.

The Foundation Shareholders, the VCLP Partners and the MIT will realise a capital gain on the disposal of their shares in InternationalCo, but for the roll-over.

The shareholders received replacement interests, being shares in HeadCo. HeadCo is not a 100% subsidiary of any company. It is the ultimate holding company of a wholly-owned group.

The Foundation Shareholders, the VCLP Partners and the MIT will choose to apply the roll-over. Should section 124-782 apply, this choice will be made jointly with HeadCo. And they will also notify HeadCo of their historical cost in InternationalCo.

Subsection 124-780(3) is satisfied.

As the newly acquired shares that the Foundation Shareholders, the VCLP Partners and the MIT receive in HeadCo are substantially the same market value and rights as their shares in InternationalCo, subsections 124-780(4) and (5) are satisfied

With the requirements in subsection 124-780(1) are satisfied, the Foundation Shareholders, the VCLP Partners and the MIT can choose to apply the roll-over under Subdivision 124-M.

Question 10

Summary

The Foundation Shareholders, the VCLP Partners and the MIT will have the cost base of their newly acquired shares in HeadCo equal to the cost base of their existing shares in InternationalCo.

Detailed reasoning

Subdivision 124-A provide the CGT consequences for applying roll-over under Subdivision 124-M.

As the Foundation Shareholders, the VCLP Partners and the MIT are disposing more than 1 share in InternationalCo and receiving more than 1 share in HeadCo, the relevant section in Subdivision 124-A is section 124-15.

As the shares in InternationalCo were acquired after 20 September 1985, the cost base for each newly acquired share in HeadCo is calculated under subsection 124-15(3). The total of the cost bases of all the newly acquired shares in HeadCo will be equal to the total of the cost bases of all the original shares in InternationalCo.

Question 11

Summary

The Foundation Shareholders, the VCLP Partners and the MIT will have the acquisition date of their newly acquired shares in HeadCo deemed to be the same as the acquisition date of their respective shares in InternationalCo.

Detailed reasoning

The Foundation Shareholders, the VCLP Partners and the MIT can obtain roll-over relief under Subdivision 124-M for the exchange of their shares in InternationalCo for shares in HeadCo. This roll-over is a replacement roll-over under item 14A of the table in section 112-115 of the ITAA 1997.

As the roll-over is a replacement-asset roll-over, item 2 of the table in subsection 115-30(1) confirms that, for the Foundation Shareholders, the VCLP Partners and the MIT, the acquisition date for the shares in HeadCo will be deemed to be the same as the acquisition date of the shares in InternationalCo.

Question 12

Summary

HeadCo's cost base for shares it acquired from the Foundation Shareholders, the VCLP Partners and the MIT is an amount equal to those shareholder's historic cost base.

HeadCo's cost base for shares it acquired from the NRI is an amount equal to the market value of shares issued to NRI.

Detailed reasoning

As the Foundation Shareholders, the VCLP Partners and the MIT can obtain roll-over relief under Subdivision 124-M for the exchange of shares in step 3 of the proposed restructure, the rule regarding cost base in section 124-782 may be applicable to the shares acquired by HeadCo.

The Foundation Shareholders, the VCLP Partners, the MIT and the NRI together hold 100% of the shares in InternationalCo before step 4. From this shareholding, they together have 100% of voting rights, right to receive dividends and right to receive distribution of capital from InternationalCo.

At the completion of step 4, the Foundation Shareholders, the VCLP Partners, the MIT and the NRI also hold 100% of shares in HeadCo.

The Foundation Shareholders, the VCLP Partners, the MIT and the NRI are common stakeholders under the definition in section 124-783.

As the Foundation Shareholders, the VCLP Partners and the MIT choose to obtain the roll-over relief, the requirements in subsection 124-782(1) are satisfied.

Therefore, HeadCo's cost base of its shares in InternationalCo, obtained from the Foundation Shareholders, the VCLP Partners and the MIT will be equal to the Foundation Shareholders', the VCLP Partners' and the MIT's historical cost base.

In relation to the InternationalCo shares that HeadCo obtained from the NRI, as the NRI is not obtaining the roll-over relief, section 124-782 is not applicable. Instead, the normal cost base rules in Division 110 apply.

Under section 110-25, the cost base for HeadCo for shares in InternationalCo obtained from the NRI will be the market value of shares issued by HeadCo in exchange for the NRI's InternationalCo shares.

Question 13

Summary

The Foundation Shareholders, the VCLP Partners and the MIT can obtain roll-over relief under Division 615 of the ITAA 1997 in respect of the proposed disposal of their shares in HeadCo for shares in HoldingCo in step 6 of the Proposed Restructure.

Detailed reasoning

Under Division 615 of the ITAA 1997, a taxpayer can choose to obtain roll-over in section 615-5 when all the requirements in that section are satisfied.

The Foundation Shareholders and the MIT are shareholders in HeadCo. Therefore they are members of HeadCo under item 1 of subsection 960-130(1). In relation to the VCLP, assets of the VCLP are held jointly by the partners of the partnership. Therefore all VCLP Partners are members of HeadCo under subsection 960-130(2). The requirement in paragraph 615-5(1)(a) is satisfied.

All the shares in HeadCo are held by the Foundation Shareholders, the VCLP Partners, the MIT and NRI and under the proposed transaction all shareholders receive shares in HoldingCo for their shares in HeadCo and nothing else. The requirements in paragraphs 615-5(1)(b) and (c) are satisfied.

At the end of step 6 of the Proposed Restructure, HoldingCo will hold all the shares in HeadCo. Section 615-15 is satisfied.

Each shareholder in HeadCo will receive a whole number of shares in HoldingCo in proportion to their holding in HeadCo. The requirements in subsection 615-20(1) are satisfied. Furthermore, as the shareholding in HoldingCo will be in proportion with the holding in HeadCo, the requirements in subsection 615-20(2) will be satisfied.

As the taxpayers seeking the roll-over relief, the Foundation Shareholders, the VCLP Partners and the MIT, are all Australian residents, the requirement in subsection 615-20(3) are satisfied.

In relation to step 6 of the Proposed Restructure, HeadCo shareholders will receive ordinary shares in HoldingCo in exchange for their original shares. All shares in HoldingCo will be held by HeadCo shareholders until completion of the arrangement. The requirements in section 615-25 will be satisfied.

As HeadCo is the head company of a tax consolidated group right before step 6 of the proposed restructure, subsection 615-30(2) is applicable. HoldingCo will choose to continue the tax consolidated group under this subsection. The requirement in section 615-30 is satisfied.

HoldingCo will satisfy the requirements in Subdivision 615-B. Paragraph 615-5(1)(d) is satisfied.

As the requirements in subsection 615-5(1) are satisfied, the Foundation Shareholders, the VCLP Partners and the MIT can choose to obtain the roll-over under Division 615.

Question 14

Summary

The Foundation Shareholders, the VCLP Partners and the MIT will have the cost base of their newly acquired shares in HoldingCo equal to the cost base of their existing shares in HeadCo.

Detailed reasoning

Section 615-40 directs us to Subdivision 124-A of the ITAA 1997 for CGT consequences when electing to apply a roll-over under Division 615.

As the Foundation Shareholders, the VCLP Partners and the MIT are disposing more than 1 share in HeadCo and receiving more than 1 share in HoldingCo, the relevant section in Subdivision 124-A is section 124-15.

As the shares in HeadCo were acquired after 20 September 1985, the cost base for each newly acquired share in HoldingCo is calculated under subsection 124-15(3). The total of the cost bases of all the newly acquired shares in HoldingCo will be equal to the total of the cost bases of all the original shares in HeadCo.

Question 15

Summary

The Foundation Shareholders, the VCLP Partners and the MIT will have the acquisition date of their newly acquired shares in HoldingCo deemed to be the same as the acquisition date of their respective shares in HeadCo.

Detailed reasoning

The Foundation Shareholders, the VCLP Partners and the MIT can obtain roll-over relief under Division 615 for the exchange of their shares in HeadCo for shares in HoldingCo. This roll-over is a replacement roll-over under item 14E of the table in section 112-115 of the ITAA 1997.

As the roll-over is a replacement-asset roll-over, item 2 of the table in subsection 115-30(1) confirms that, for the Foundation Shareholders, the VCLP Partners and the MIT, the acquisition date for the shares in HoldingCo will be deemed to be the same as the acquisition date of the shares in HeadCo.

Question 16

Summary

The HeadCo tax consolidated group will not be deconsolidated when HoldingCo becomes the head entity.

Detailed reasoning

As HoldingCo will make the choice under subsection 615-30(2) for the HeadCo tax consolidated group to continue, we are referred to sections 703-65 to 703-80 for the consequences of this choice as advised in the note to the subsection.

The HeadCo tax consolidated group will not cease to exist. Instead, it will continue with HoldingCo as the head company at the completion of step 6.