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Edited version of private advice
Authorisation Number: 1051977938174
Date of advice: 22 July 2022
Ruling
Subject: Demerger
Question 1
Will a capital gain or capital loss made by Hold Co from CGT event A1 happening to its shares in Sub Co be disregarded under section 125-155 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Question 2
As a consequence of the transfer of Hold Co's shares in Sub Co to the shareholders of Hold Co, is Hold Co required under subsection 45D(1A) of the Income Tax Assessment Act 1936 (ITAA 1936) to give a copy of the Commissioner's determination to its shareholders?
Answer
No.
This ruling applies for the following period:
1 July 20XX to 30 June 20XX
Relevant facts and circumstances
Hold Co is a company incorporated in Australia. It owned more than 20% of the shares in another company incorporated in Australia, Sub Co.
The shareholders of Hold Co approved a resolution for Hold Co to undertake a reduction of share capital under sections 256B and 256C of the Corporations Act 2001.
Hold Co satisfied the reduction of share capital by transferring most of its shares in Sub Co to the shareholders of Hold Co in proportion to their shareholdings.
Immediately before the implementation of the reduction of share capital, Hold Co's share capital account was not tainted (within the meaning of Division 197 of the ITAA 1997).
Relevant legislative provisions
ITAA 1997 section 125-155
ITAA 1936 section 45A
ITAA 1936 section 45B
ITAA 1936 subsection 45D(1A)
Reasons for decision
A capital gain or capital loss that is made by Hold Co from CGT event A1 happening to its shares in Sub Co will be disregarded because the requirements of section 125-155 of the ITAA 1997 are satisfied.
As neither section 45A nor section 45B of the ITAA 1936 applies, subsection 45D(1A) of the ITAA 1936 does not apply.