Equities Fund - scrip for scrip roll-over
Please note that the PDF version is the authorised version of this ruling.
|Table of Contents||Paragraph|
|What this Ruling is about|
|Who this Ruling applies to|
|When this Ruling applies|
|Appendix - Explanation|
Relying on this Ruling
This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953.
If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling.
1. This Ruling sets out the tax consequences for holders of units in Equities Fund (Fund 105) in relation to the acquisition of those units by EQT Flagship Fund (Fund 2) in exchange for units in Fund 2.
- were a holder of units in Fund 105 on 2 December 2020 (the Implementation Date)
- participated in the scheme that is subject to this Ruling
- are a resident of Australia (as defined in subsection 6(1) of the Income Tax Assessment Act 1936), and
- held your units in Fund 105 neither as revenue assets (as defined in section 977-50) nor as trading stock (as defined in subsection 995-1(1)), that is, you held your units on capital account.
Note: Division 230 will not apply to individuals, unless they have made an election for it to apply.
9. You will make a capital gain from CGT event A1 happening if the capital proceeds from the disposal of a Fund 105 unit exceeds its cost base. You will make a capital loss from CGT event A1 happening if the capital proceeds from the disposal of a Fund 105 unit are less than its reduced cost base (subsection 104-10(4)).
11. Subject to the qualification in paragraph 12 of this Ruling, if you make a capital gain from the disposal of your Fund 105 units, you may choose to obtain scrip for scrip roll-over (section 124-781).
12. Scrip for scrip roll-over cannot be chosen if any capital gain you might subsequently make from the replacement Fund 2 units would be disregarded, except because of a roll-over (paragraph 124-795(2)(a)).
13. If you choose to apply scrip for scrip roll-over you will be able to disregard any capital gain arising from CGT event A1 happening in respect of the exchange of your Fund 105 units for replacement Fund 2 units (subsection 124-785(1)).
14. The first element of the cost base and reduced cost base of each replacement Fund 2 unit received is calculated by reasonably attributing to it the cost base and reduced cost base of the Fund 105 units for which it was exchanged (subsections 124-785(2) and (4)).
15. You calculate the first element of the cost base or reduced cost base of each replacement Fund 2 unit by dividing the aggregate cost bases or reduced cost bases of your Fund 105 units by the number of replacement Fund 2 units you received.
17. If you do not, or cannot, choose scrip for scrip roll-over, you must account for any capital gain or capital loss from CGT event A1 happening on the disposal of your Fund 105 units in working out your net capital gain or net capital loss for the income year in which CGT event A1 happens (sections 102-5 and 102-10).
18. If you make a capital gain and do not, or cannot, choose scrip for scrip roll-over, you can treat the capital gain as a 'discount capital gain' provided that the conditions in Subdivision 115-A are met. In particular, the Fund 105 units that you disposed of must have been acquired by you at least 12 months before their disposal to Equity Trustees Limited, as trustee for Fund 2 (hereafter referred to as Fund 2 Trustee).
19. If you do not, or cannot, choose scrip for scrip roll-over, the first element of the cost base and reduced cost base of each replacement Fund 2 unit received is equal to the market value of each Fund 105 unit given in respect of acquiring each Fund 2 unit, worked out as at the time of their acquisition (subsections 110-25(2) and 110-55(2)).
22. Fund 105 is an Australian unit trust which was established on 18 June 2014 by ANZ Trustees Limited pursuant to the terms recorded in the Extract of Minutes of the Board meeting held on 18 June 2014.
27. Fund 105's investment strategy is to provide investors with the potential for capital gain similar to the S&P/ASX 100 Price Index via investment in a diversified portfolio of shares listed or about to be listed on the Australian Securities Exchange, and an income stream from their dividends greater than that derived from the relevant index.
29. Fund 2 is an Australian unit trust which was established on 1 August 2003 by the Constitution for the Equity Trustees Limited Common Fund No. 2 (Fund 2 Trust Deed) as amended by Supplemental Deeds dated 21 January 2004, 13 February 2004, 30 June 2005, 26 June 2013 and 13 December 2017.
34. Fund 2 Trustee and Fund 105 Trustee sought to increase investor returns of the unitholders in Fund 2 and Fund 105 by decreasing portfolio management costs, via a reorganisation that would streamline the operations and management of Fund 2 and Fund 105.
40. Under the scheme, the unitholders in Fund 105 and Fund 2 Trustee dealt with each other at arm's length and Fund 2 had more than 300 beneficiaries just before the implementation of the scheme (for the purposes of subsection 124-781(4)).
Commissioner of Taxation
24 February 2021
|This Explanation is provided as information to help you understand how the Commissioner's view has been reached. It does not form part of the binding public ruling.|
43. One consequence identified in this Ruling is the availability of scrip for scrip roll-over under Subdivision 124-M. The roll-over enables a shareholder or a unitholder to disregard a capital gain from the disposal of a share or a unit if the shareholder or unitholder receives a replacement share or unit in exchange. It also provides special rules for calculating the cost base and reduced cost base of the replacement share or unit.
44. Subdivision 124-M contains a number of conditions for, and exceptions to, a shareholder or unitholder being able to choose scrip for scrip roll-over. The main requirements that are relevant to the scheme that is the subject of this Ruling are:
- units are exchanged for units in another trust
- entities have fixed entitlements to all of the income and capital of the original and the acquiring trust
- the exchange is in consequence of an arrangement that satisfies subsections 124-781(2) or (2A)
- conditions for the roll-over are satisfied
- further conditions, if applicable, are satisfied, and
- exceptions for obtaining scrip for scrip roll-over are not applicable.
You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
Not previously issued as a draft
ITAA 1936 6(1)
ITAA 1997 102-5
ITAA 1997 102-10
ITAA 1997 104-10(1)
ITAA 1997 104-10(3)(b)
ITAA 1997 104-10(4)
ITAA 1997 109-10
ITAA 1997 110-25(2)
ITAA 1997 110-55(2)
ITAA 1997 Subdiv 115-A
ITAA 1997 115-30(1)
ITAA 1997 116-20(1)(b)
ITAA 1997 Subdiv 124-M
ITAA 1997 124-781
ITAA 1997 124-781(2)
ITAA 1997 124-781(2A)
ITAA 1997 124-781(4)
ITAA 1997 124-783
ITAA 1997 124-785(1)
ITAA 1997 124-785(2)
ITAA 1997 124-785(4)
ITAA 1997 124-795(2)(a)
ITAA 1997 124-795(4)
ITAA 1997 Div 230
ITAA 1997 Div 276
ITAA 1997 977-50
ITAA 1997 995-1(1)
Corporations Act 2001 Chapter 5C
Corporations Act 2001 Chapter 5D