| Disclaimer You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1051942351894
Date of advice: 22 June 2022
Ruling
Subject: Demerger
Question 1
As a consequence of section 125-155 of the ITAA 1997, will Company X disregard any capital gain or capital loss it makes under CGT event A1, C2, C3 or K6 upon the transfer of its shares in Company Y to the shareholders of Company X?
Answer
Yes.
Question 2
As a consequence of the transfer of the shares in Company Y to the shareholders of Company X, would Company X be required under subsection 45D(1A) of the ITAA 1936 to give a copy of a notice to its shareholders?
Answer
No.
This ruling applies for the following period periods:
Income year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Company X and Company Y are both companies incorporated in Australia.
Company X owns 100% of the ordinary shares in Company Y.
Company X will transfer all the ordinary shares it owns in Company Y to the shareholders of Company X in proportion to their shareholding in Company X.
The transfer will partly be accounted for by debiting an amount to the share capital account of Company.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 45A
Income Tax Assessment Act 193 paragraph 45A(3)(b)
Income Tax Assessment Act 1936 subsection 45A(2)
Income Tax Assessment Act 1936 section 45B
Income Tax Assessment Act 1936 subsection 45B(3)
Income Tax Assessment Act 1936 subsection 45B(4)
Income Tax Assessment Act 1936 subsection 45B(5)
Income Tax Assessment Act 1936 subsection 45B(6)
Income Tax Assessment Act 1936 subsection 45B(8)
Income Tax Assessment Act 1936 paragraph 45B(8)(k)
Income Tax Assessment Act 1936 subsection 45B(9)
Income Tax Assessment Act 1936 section 45BA
Income Tax Assessment Act 1936 section 45C
Income Tax Assessment Act 1936 subsection 45C(3)
Income Tax Assessment Act 1936 section 45D
Income Tax Assessment Act 1936 subsection 45D(1A)
Income Tax Assessment Act 1936 subsection 177D(2)
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 125-65
Income Tax Assessment Act 1997 section 125-70
Income Tax Assessment Act 1997 subsection 125-70(2)
Income Tax Assessment Act 1997 subsection 125-70(6)
Income Tax Assessment Act 1997 paragraph 125-70(7)(a)
Income Tax Assessment Act 1997 section 125-75
Income Tax Assessment Act 1997 section 125-155
Reasons for decision
Question 1
Company X will disregard any capital gain from CGT event A1 happening as a result of the transfer of its shares in Company Y to the shareholders of Company X in accordance with section 125-155 of the ITAA 1997, because the transfer of shares will be a 'demerger' as defined in section 125-70 of the ITAA 1997.
Question 2
Having regard to the relevant circumstances of the scheme:
• the Commissioner will not make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies to all or part of the capital benefits
• the Commissioner will not make a determination under subsection 45B(3) of the ITAA 1936 that section 45BA or section 45C of the ITAA 1936 applies to all or part of the demerger benefit or the capital benefit (respectively).
Therefore, Company X will not be required under subsection 45D(1A) of the ITAA 1936 to give a copy of a notice to its shareholders.