Edited version of private advice

Authorisation Number: 1052041530089

Date of advice: 7 October 2022

Ruling

Subject: Pre-CGT shares and demerger

Question

Will you retain the pre-CGT status of the original shares you purchased in Company A prior to 20 September 1985?

Answer

Yes.

The original shares you purchased in Company A remained pre-CGT shares after the demerger in about 20XX. As such there will be no Capital Gains Tax upon the disposal of these shares.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Prior to 20 September 1985 you purchased shares in Company A.

In about 20XX the Board of Company A approved a Demerger of Company A.

Company A shareholders received one new Company B share for every 2 old Company A shares held.

Company A gave a return of capital (CGT event G1) to the value of $x per share to its shareholders at the time.

The return of capital was issued in the form of shares in Company B (one share in Company B for every two shares held in Company A).

Acquisition cost of the new Company B shares was $x per share and the acquisition date was in about 20XX. As such these are not pre-CGT shares and will be subject to Capital Gains Tax upon the disposal.

You received a statement from Company B dated in about 20XX advising that following the approval of the demerger of Company A, Company A has transferred a number of shares to you (in Company B) in accordance with the Scheme of Arrangement approved by the Supreme Court of NSW in about 20XX.

The statement also confirms the above-mentioned CGT cost base for the new shares in Company B.

You sold all of your share- holdings in Company B in the 20XX-XX financial year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10