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Edited version of private advice
Authorisation Number: 1051928132428
Date of advice: 30 November 2021
Ruling
Subject: Employer share scheme
Question 1
Will a deferred taxing point arise under section 83A-120 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the securities held in Entity X as a result of the implementation of the demerger scheme?
Answer
No.
Question 2
Are the new securities issued by Entity Y to the holders of securities in Entity X as a result of the implementation of the demerger scheme ESS interests provided under an employee share scheme within the meaning of subsection 83A-10(2) of the ITAA 1997?
Answer
No.
Question 3
Does the issue of the new securities issued by Entity Y to the holders of securities in Entity X as a result of the implementation of the Demerger scheme, give rise to the derivation of assessable income in their hands under any one or more of the following sections:
1. Section 6-5 of the ITAA 1997,
2. Section 15-2 of the ITAA 1997; or
3. Section 44(1) of the Income Tax Assessment Act 1936?
Answer
No.
Question 4
Do CGT events:
• C2 under subsection 104-25(1) of the ITAA 1997,
• D1 under subsection 104-35(1) of the ITAA 1997, or
• H2 under subsection 104-155(1) of the ITAA 1997
happen when, as part of the demerger involving a return of share capital to shareholders in Entity X, Entity X securities receive equivalent securities in Entity Y as compensation for the loss in value of their Entity X securities?
Answer
No.
Question 5
Will the first element of the cost base and the reduced cost base of the ownership interests in Entity X and Entity Y held by Entity X security holders be subject to adjustment under subsection 125-80(2) of the ITAA 1997?
Answer
Yes.
Question 6
Will the Entity X security holders be taken, for the purpose of Division 115 of the ITAA 1997, to have acquired a proportionate number of equivalent securities in Entity Y on the same date as their ownership interests in Entity X were acquired, pursuant to item 2 of the table at subsection 115-30(1)?
Answer
Yes.
Relevant facts and circumstances
Entity X applied for a private binding ruling in respect to the issue of new securities in Entity Y as a result of a demerger.
Relevant legislative provisions
Section 83A-120 of the ITAA 1997
Section 83A-10 of the ITAA 1997
Section 83A-340 of the ITAA 1997
Section 83A-105 of the ITAA 1997
Section 83A-20 of the ITAA 1997
Section 83A-45 of the ITAA 1997
Section 6-5 of the ITAA 1997
Section 15-2 of the ITAA 1997
Section 44 of the ITAA 1936
Subsection 6(1) of the ITAA 1936
Section 104-25 of the ITAA 1997
Section 108-5 of the ITAA 1997
Section 104-35 of the ITAA 1997
Section 104-155 of the ITAA 1997
Section 125-80 of the ITAA 1997
Section 125-90 of the ITAA 1997
Section 115-30 of the ITAA 1997
Section 115-25 of the ITAA 1997
Subsection 995-1(1) of the ITAA 1997
Section 112-115 of the ITAA 1997