Private ruling: Capital gains tax – rollovers - transfer to wholly owned company
Date of advice: 29 June 2018
Published: September 2018
Ruling period: Income year ending 30 June 2018 | Income year ending 30 June 2019
Date scheme commenced: 1 July 2017.

Ruling: Q1: Will roll-over relief be available under Subdivision 122-A of the Income Tax Assessment Act 1997 (ITAA 1997) for the share transaction? | A1: Yes.

Relevant facts and circumstances: You are the trustee of the Trust which is an Australian family trust. Company A issued XXX post-capital gains tax ordinary shares to the Trust. Company A is an Australian investment company which holds approximately $X in investments, including cash, Australian listed shares, bonds, and listed and unlisted public trusts. It issued other ordinary shares to other Australian entities. Company A pays fully-franked dividends and its only liabilities are current tax and expenses. The market value of the Trust’s shares in Company A is estimated to be $X after allowing for future tax and reasonable expenses. There are no prior year unpaid present entitlements or loans between the Trust and Company A. The beneficiaries of the Trust include Company B which is a newly incorporated Australian company that has issued one share for $X to the Trust. It is proposed that the Trust will sell their Company A shares to Company B at market value. To pay for the Company A shares, Company B will issue XXX fully paid ordinary shares that are not redeemable to the Trust ( the share transaction ). The Trust will own all of the shares in Company B after the XXX shares are issued. The market value of the XXX Company B shares the Trust will receive will be substantially the same as the market value of the Company A shares the Trust will sell to Company B.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Subdivision 122-A

Reasons for decision: Summary: Based on the information and documentation provided it is viewed that the necessary conditions for a roll-over contained in Subdivision 122-A of the ITAA 1997 will be satisfied Therefore, a choice can be made to obtain the roll-over under Subdivision 122-A of the ITAA 1997 in relation to the disposal of the Trust’s XXX Company A shares to Company B in consideration for the XXX Company B shares.