Private ruling: Division 149
Date of advice: 4 March 2026
Published: 29 June 2026
Ruling period: From 20 September 1985 to the year ended 30 June 2028 or to the end of the financial year when the designated liquidator distributes the funds to the shareholders following the sale of the Property located on, whichever is later.
Date scheme commenced: 20 September 1985

Ruling: Q1: Do the provisions in Division 149 of the Income Tax Assessment Act 1997 (ITAA 1997), or its predecessor provisions, apply such that the relevant Property is still a pre-CGT asset? | A1: Yes. | Q2: Do the provisions in Division 149 of the ITAA 1997 apply such that Company B's shares in Company A are a pre-CGT asset? | A2: Yes. | Q3: Will the liquidator's distribution, sourced only from paid up share capital and a pre-CGT reserve comprising the gain derived from the sale of the Property, that will be received by Company A shareholders (including Company B) be capital proceeds for the cancellation of Company A shares under CGT Event C2 in section 104-25 of the ITAA 1997 and not a deemed dividend under section 47 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A3: Yes, the liquidator's distribution will be capital proceeds for the cancellation of Company A shares under CGT Event C2 and will not be deemed dividends under section 47 of the ITAA 1936. | Q4: Will the liquidator's distribution, sourced only from paid up share capital and a pre-CGT reserve comprising the liquidation distribution received in relation to its shares in Company A, that will be received by the Company B shareholders be capital proceeds for the cancellation of the Company V shares under CGT Event C2 in section 104-25 of the ITAA 1997 and not a deemed dividend under section 47 of the ITAA 1936? | A4: Yes, the liquidator's distribution will be capital proceeds for the cancellation of the Company B's shares under CGT Event C2 and will not be deemed dividends under section 47 of the ITAA 1936.

Relevant facts and circumstances: Company A (1) Company A is an Australian proprietary company incorporated before 20 September 1985. (2) Company A is a private company, and its shares are not listed on any stock exchange. (3) Company A acquired the Property before 20 September 1985. (4) Company A was originally controlled by several different families ('the original families'). These families were: (a) Family 1 (whose descendants are the Family 1A) (b) Family 2 (c) Family 3 (d) Family 4 (e) Family 5, and (f) Family 6. (5) Seven classes of shares, known as A, B, C, D, E, F and G were created. A to F class shares granted exclusive use rights to each commercial premises on the ground floors of the Property. The holders of these shares from time to time are referred to in this ruling as 'the Shareholders'. G class shares granted rights to the upper floors of the Property. (6) The 6 original families listed in paragraph 4 operated their family businesses in each commercial premises on the ground floor. The G class shares have always been exclusively owned by Company B Pty Ltd. (7) To hold shares in Company A, a lease agreement with Company A must be in place in accordance with Article 4 of the Company A Constitution. (8) The Company A Constitution has not been amended since incorporation. (9) Pursuant to the Company A Constitution, there is no distinction between the various share classes on issue in Company A such that all share classes are entitled to equal rights to dividends, rights to capital distribution and voting rights. Company B (10) Company B Pty Ltd was incorporated before 20 September 1985, around the same time as Company A. (11) As per paragraph 6, Company B owned all the G class shares in Company A which relate to the upper floor of the Property. (12) Company B shares are held by the shareholders of Company A in the same proportions as their Company A shares and carry equivalent rights to dividends, rights to capital distribution and voting rights. (13) It has long been a requirement for the Shareholders to transact in Company A and Company B simultaneously, which has had the practical effect of stapling the shares of the 2 companies. The shareholders are aware and understand the arrangement to be that they cannot transfer their Company A shares without transferring their Company B shares equally (and vice versa). (14) While no formal stapling agreement exists, the terms of the constitution of Company A and Company B effectively force the shareholders to treat the shares if they were stapled. The following clauses are relevant: (a) The constitutions of both Company A and Company B at article XX require that holders of class A to F shares in Company A are able to act as Directors in both Company A and Company B. (b) As soon as a Director ceases to hold class A to F shares in Company A, they will be prevented from being a Director of both Company A and Company B. (c) Article XX of the Company B Constitution imposes a requirement that the Directors consent to any transfer of shares. (d) Article XX of the Company A Constitution permits transfers but gives the Directors of Company A a wide power to prevent a transfer (if they determine the new shareholders is not a 'respectable and responsible person'). (e) Article XX of both the Company A Constitution and the Company B Constitution imposes a requirement that the entire class of shares must be transferred at once. (15) In the letter attached to the application for private ruling, you described the above arrangement as a 'double company' structure which allowed the Shareholders to receive rent from leasing the upper levels at the Property via their shareholdings in Company B, and in the proportions in which they held shares in Company A, while also giving those Shareholders exclusive rights to the ground floor retail units that the relevant Shareholders leased. 19 September 1985 (16) Before 20 September 1985, several transactions took place which changed the original ownership structure of Company A and Company B. The ownership structure immediately before 20 September 1985 is captured in Table A. Table A:ownership structure immediately before 20 September 1985 Shareholder Percentageof Company A % Percentage via Company B % Percentage of Company B % Total % of Company A (incl. indirectly via Company B) Person 1 (Family 1) xx xx xx xx Person 2 (Family 1) xx xx xx xx Person 1 (Family 2) xx xx xx xx Person 2 (Family 2) xx xx xx xx Person 3 (Family 2) xx xx xx xx Person 1 (Family 3) xx xx xx xx Person 2 (Family 3) xx xx xx xx Person 1 (Family 4) xx xx xx xx Person 2 (Family 4) xx xx xx xx Person 3 (Family 4) xx xx xx xx Person 4 (Family 4) xx xx xx xx Person 1 (Family 5) xx xx xx xx Company B Pty Ltd (Family 2) xx - - xx Person 1 & 2, Family 6 xx xx xx xx (17) The shareholders in Column 1 of Table A are referred to as pre-CGT shareholders. Changes to shareholding after 20 September 1985 (18) No further shares have been issued for Company A or Company B on or after 20 September 1985. (19) Since 20 September 1985, there have been changes to the ownership of the shareholdings, predominately due to family deaths and the sale of shares. (20) Members of the original families (or entities that they own) that inherited shares from pre-CGT shareholders and hold those shares in the current ownership structure of Company A and Company B are captured in Table B below. Table B: current ownership structure Shareholders as at 19 September 1985 Current Shareholder Transfer % of C ompany A % via Company B % of Company B Total % of Company A (inc. indirectly via Company B) Person 1 and Person 2 (Family 1) Person 1 (Family 1A) Deceased xx xx xx xx Person 2 (Family 1A) Person 1,2,3,4 (Family 2) Person 5 (Family 2) Deceased xx xx xx xx Person 6 (Family 2) Person 1 and Person 2 (Family 3) Company C (Family 2) xx xx xx xx Person 1,2,3,4 (Family 4) Person 6 (Family 4) Deceased xx xx xx xx Person 7 (Family 4) Total % Xx (>50%) Xx (>50%) Family 1 ownership (21) Immediately before 20 September 1985, Person 1 and Person 2 each owned approximately xx% of the shareholding, totalling xx%. (22) Person 1 passed away in after 20 September 1985, and their shares formed part of the Estate. their last Will and Testament bequeathed their shares to Person 2. (23) Person 2 passed away in 19XX. Their shares, together with the late Person 1 shares formed part of the residual Estate. Their last Will and Testament left the residue of their estate to their Family 1A. Family 2 ownership (24) Immediately before 20 September 1985, Person 1, 2, 3 (Family 2) owned a total shareholding of xx%. (25) After 20 September 1985, Person 3 sold their shares, being a xx% shareholding, to Person 1 and 2 (Family 7). In 20XX, all of Family 7's shares were transferred the shareholding to Person 4 (Family 2). For clarity, Person 4 (Family 2) and Family 7 are not pre-CGT shareholders. (26) Person 2 transferred their shares, being X% shareholding to Person 1 (a pre-CGT shareholder) on 31 December 1991. (27) Company C (Family 2) acquired a XX% shareholding from Person 1 and 2 (Family 3) (the pre-CGT shareholders), in 19XX (post-CGT). At this time, Person 1 and Person 4 (Family 2) were equal and the only shareholders of Company C (Family 2), the shares being equivalent to ordinary shares. (28) Person 1 passed away in 20XX, and their shares in Company A, Company B and Company C (Family 2) formed part of the Estate. Their last Will and Testament left the whole of their Estate to Person 4. (29) Person 4 passed away in 20XX. Their shares and Person 1's shares in Company A, Company B and Company C formed past of the residual Estate. In their last Will and Testament, they left the residue of their estate to be equally divided between Person 5 Family Trust and Person 6 Family Trusts (each referred to as 'Testamentary Trust') to be established pursuant to the Will. However, Person 4's will conferred on the trustee of each Testamentary Trust the power to exclude any part of the gift from the gift to the Testamentary Trust and to nominate the recipient of the gift. Upon doing so, Person 4's will provided that the excluded property is excluded from the gift to the Testamentary Trust and is taken to have been bequeathed to the nominated recipient in his or her own right absolutely and the provisions of the will are amended and to be read accordingly. Before the distribution of the residue to the Testamentary Trust, the trustee of each Testamentary Trust excluded 100% of the proposed gift, nominating Person 5 and Person 6 (as relevant) to personally receive 100% of the gift. Family 4 ownership (30) After 20 September 1985, Person 1 transferred their shares to Person 5 (a pre-CGT shareholder) and Person 1 transferred their shares to Person 3 (a pre-CGT Shareholder). (31) Subsequently, Person 5 transferred their shareholding to Person 4. (32) Person 3 passed away in 20XX, and their shares formed part of the Estate. Their last Will and Testament left the whole of their estate to Person 4. (33) Person 4 passed away in June 2016. Their shares and Person 3's shares formed part of the residual Estate. Their last Will and Testament stipulated that the residue of their estate be divided according to the terms of the Will between Person 6 and Person 7. This resulted in Person 6 and Person 7 each inheriting half of the shares. Other share transfers to third parties (34) After 20 September 1985, Person 1 and Person 2 (Family 6) sold their jointly held shares to a third party. (35) Also after 20 September 1985, a significant shareholder, Person 1 (Family 5) sold their shares to a third party. Proposed sale of Property and eventual liquidation (36) The Property has a potential value of around $XX million. (37) The Shareholders are considering selling the Property on the open market; however, no contracts have been entered into yet. (38) Following the sale of the Property, it is proposed that both Company A and Company B are placed into liquidation. (39) The proposed steps will be: Step 1: Company A sells the Property and accounts for the profit in a pre-CGT reserve in its accounts Step 2: Company A declares a dividend of any retained earnings other than pre-CGT reserve Step 3: Company A enters a members' voluntary liquidation, and a liquidator is appointed Step 4: the liquidator makes a liquidator's distribution to the Shareholders in Company A, sourced entirely from the pre-CGT reserve and paid-up capital Step 5: Company B accounts for the liquidator's distribution in relation to its shares in Company A as a pre-CGT reserve. Step 6: Company B declares a dividend of any retained earnings other than the pre-CGT reserve Step 7: Company B enters a members' voluntary liquidation, and a liquidator is appointed Step 8: the liquidator makes a liquidator's distribution to the Shareholders in Company B, sourced entirely from the pre-CGT reserve and paid-up capital, and Step 9: Company A and Company B are de-registered.

Relevant legislative provisions: Division 149, Income Tax Assessment Act 1997 | Section 47, Income Tax Assessment Act 1936

Reasons for decision: Summary: Question 1: Do the provisions in Division 149 of the Income Tax Assessment Act 1997 (ITAA 1997), or its predecessor provisions, apply such that the relevant Property is still a pre-CGT asset? | Detailed Reasoning - Application:: (47) The Property was purchased by Company A before 20 September 1985. (48) Company A and Company B are not ultimate owners, and therefore, underlying interests in the Property must be traced through to the owners of shares in Company A and Company B. (49) Company A and Company B are ultimately owned by the same shareholders. Based on the information provided, we accept that the shares in Company A and Company B gave the Shareholders a percentage right to the income and capital of the company. Although there are incomplete, and some incorrect, records (particularly for Company B) we accept based on the information that has been provided that the transactions in the shares occurred concurrently and in the same way in each company. (50) This shareholder interest in the Property comprises the following: (i) shares in Company A held by the shareholders of Company A directly, (ii) Company A shares held by the shareholders of Company B indirectly, and (iii) Shares in Company B held by the shareholders of Company B directly. (51) Section 149-10(a) is satisfied. Company A acquired the Property before 20 September 1985. (52) Immediately prior to 20 September 1985, the Property was held, both directly and indirectly, by shareholders from Families 1, 2, 3, 4, 5. The pre-CGT owners are detailed in Column 1 of Table A. (53) To determine the percentage underlying interest held by ultimate owners in the Property, you calculated the ownership percentages of each ultimate owner by combining their direct shareholding and indirect shareholding (through Company B) in Company A. You calculated the percentage of the underlying interests that continued to be held by pre-CGT owners (or that are treated as having been so held) for the purpose of determining if subsection 149-10(b) and (c) are satisfied as these provisions depend on whether the Property, ceased to be a pre-CGT asset due to the pre-CGT ultimate owners no longer holding more than 50 per cent of the relevant interests, directly and indirectly. We agree with your calculations. | Detailed Reasoning - The ultimate owners of the Property: (54) Immediately before 20 September 1985, the individuals listed in Table A were the ultimate owners of the Property through their direct and indirect interests in Company A and Company B. Since then, these ultimate owners have either transferred their shares to other ultimate owners within the group or sold them to unrelated third parties. Upon the deaths of the ultimate owner, their shares were inherited by new owners. (55) For the purposes of Division 149, it becomes necessary to trace these ownership changes to identify which ultimate owners remain within the ultimate ownership group. The following paragraphs explain how the sale of shares within the group, as well as the consequences of a person's death, affect this analysis and how the continuing ultimate owners are determined. | Detailed Reasoning - Sale of shares between pre-CGT ultimate owners: (56) The following share transfers occurred on or after 20 September 1985, within the group of ultimate owners. (i) On DD MM 19XX, Person 2 (Family 2) transferred his shares to Person 1 (Family 2) (a pre-CGT shareholder). This increased Person 1 (Family 2) shareholder interest. (ii) On DD MM 19XX, Person 1 and 2 (Family 3) sold their shares to Company C (Family 2). The shareholders of the company were Person 1 and 4 (Family 2) who had equal rights to the income and capital of Company C (Family 2). Therefore, a 50% interest in these Company A shares continued to be held by a pre-CGT owner. (iii) On DD MM 19XX, Person 1 & 2 (Family 4) transferred their shares to Person 3 & 4 (Family 3), respectively. Person 3 & 4 (Family 4) are both pre-CGT shareholders and this transfer added to their separate percentage shareholder interests. (57) These changes only increased or decreased the pre-CGT owner's individual ownership percentage without any impact to the majority underlying interests. Paragraph 10 in IT 2530 [1] clarified that the Commissioner is concerned with continuity of majority underlying interests, not with each individual transfer. | Detailed Reasoning - Transfers of shares between family members - including as a result of the death of a person (Item 2, subsection 149-30(3)): (58) A number of transfers of shares within the original families occurred. Those transfers occurring due to the death of a pre-CGT ultimate owner maintained the continuity of beneficial interest. Subsection 149-30(3) and (4) allows a new ultimate owner to be treated as if they held the percentage underlying interest acquired because of the former owner's death at any time that the former owner held their interest (in addition to any other underlying interests the new owner held in their own right) In this circumstance, a new owner is taken to stand in the shoes of the former owner. | Detailed Reasoning - Family 1: (i) Upon Person 1 (Family 1) passing in 19XX, the shares he held in Company A and Company B were transferred to Person 2 (Family 1) as the new owner under his will. These shares were added to Person 2 (Family 1)'s ownership percentage until their death in 19XX, following which both Person 1 and 2 (Family 1) shares were transferred to Person 1 & 2 (Family 1A) as the new owners, under Person 2 (Family 1)'s Will. Person 1 & 2 (Family 1A) are treated as if they held the percentage underlying interest acquired as a result of the shares of Family 1 passing to them under Person 2 (Family 1)'s that Person 1 & 2 held. | Detailed Reasoning - Family 2: (i) Upon Person 1 (Family 1) passing in 20XX, the shares they held as shareholder of Company A, Company B and Company C (Family 2) were transferred to Person 2 (Family 2) under their will. (ii) In respect of the shares Person 4 (Family 2) acquired under Person 1 (Family 2) will, Person 4 is treated as if they had held the corresponding underlying interest at all times that Person 1 held those shares. (iii) As Person 4 was not a pre-CGT owner, the shares they acquired other than because of the death of Person 1 (Family 1), resulted in them holding an underlying interest that was not held immediately before 20 September 1985. This means that the shares in Company A and Company B transferred to them from Family 8 (XX% shareholding) and their interest in the Company A and Company B shares held by Company C (Family 2) (xx% shareholding) are not included in the calculation of majority underlying interests. (iv) Upon Person 4 (Family 2) passing in 20XX, the shares in Company A, Company B and Company C (Family 2) owned by Person 4 were transferred to Person 5 & 6. As described in the facts, in our view, these shares were transmitted directly to each of Person 5 & 6 under Person 4's Will as a result of the operation of clause 4.7 and 5.7 of Person 2 will and did not become property settled on the Testamentary Trusts. Person 5 & 6 will be treated as having held the percentage underlying interests that were acquired a result of Person 1's shares passing to Person 4 under their Will and Person 1's shares then passing to Person 5 & 6. | Detailed Reasoning - Family 4: (i) As Person 4 (Family 4) was not a pre-CGT owner, the Company A and Company B shares acquired from Person 5 (Family 4) in 19XX are not included in the calculation of majority underlying interests (XX% shareholding) (ii) The shares that were transferred to Person 4 (Family 4) upon their husband's Person 3 (Family 4) on DD MM 20XX under Person 3 (Family 4) Will do result in Person 4 (Family 4) being treated as if they held the percentage underlying interest acquired at all times that Person 3 (Family 4) held those shares. (iii) Upon Person 2 (Family 4) death in 20XX, the shares that were Person 2's that transferred to Person 7 (Family 4) and Person 6 (Family 4) as new owners under the terms of their Will, will result in Person 5 & 6 being treated as if they held the percentage underlying interest at all times that Person 2 held those shares. However, the shares held by Person 4 at the time of their death that they acquired from Person 5 are not included in the calculation of majority underlying interests. | Detailed Reasoning - Reductions of the majority underlying interests: (59) The following sale of shares to third parties significantly reduced the underlying interests held by pre-CGT owners. (i) On DD MM 19XX, Person 1 & 2 (Family 7) sold their jointly held shares to a third party (XX% shareholding). (ii) On DD MM 19XX, a significant shareholder, Person 1 (Family 5) sold their shares to a third party (XX% shareholding). (60) The following transfers of shares discussed earlier that were between family members, but that were not as a result of the death of a pre-CGT owner, also reduced the underlying interests continuing to be held by pre-CGT owners: (i) Person 3 (Family 2) transferring their shares to, who later transferred the shares to Person 4 Family 2 (xx% shareholding). (ii) Family 3 transferred their shares to Company C (Family 2), whose shares were held 50% by Person 2 (Family 2) (xx% shareholding). (iii) Person 5 (Family 4) transferring their shares to Person 4 (Family 4) (XX% shareholding) (61) In summary, the underlying interests in the Property that are held by individuals who are treated as having held those interests from immediately before 20 September 1985 (as a result of subsections 149-30(3) and (4) of the ITAA 1997) has been calculated as greater than 50%. (62) As more than 50% of the underlying interests in the Property continue to be held by individuals who are treated as having continually held those interests from immediately before 20 September 1985, the Property has not stopped being a pre CGT asset under section 160ZZS(1) of the ITAA 1936 or section 149-30 of the ITAA 1997. (63) The Property continues to be a pre-CGT asset under subsection 149-10 of the ITAA 1997. | Detailed Reasoning - Answer:: (64) Yes , Company B's shares in Company A are a pre-CGT asset . | Detailed Reasoning - Application:: (65) Company B acquired its shares in Company A pre-CGT. (66) The shareholding in Company B has changed since 20 September 1985 concurrently and in the same way as the shareholding changes in Company A. The reasoning that applied to tracing the underlying interests in the Property of Company A apply equally to the property of Company B (other than the tracing through Company B). On that basis, the underlying interests in Company B's shares in Company A are held by individuals who are treated as having held those interests from immediately before 20 September 1985 (as a result of subsections 149-30(3) and (4) of the ITAA 1997). The total percentage of underlying interests so held has been calculated as more than 50%. (67) As more than 50% of the underlying interests in Company B's shares in Company A continue to be held by individuals who are treated as having continually held those interests from immediately before 20 September 1985, Company B's shares in Company A have not stopped being a pre CGT asset under section 160ZZS(1) of the ITAA 1936 or section 149-30 of the ITAA 1997. (68) Company B shares in Company A continue to be a pre-CGT asset under subsection 149-10 of the ITAA 1997. | Detailed Reasoning - Question 3: (69) Will the liquidator's distribution sourced only from paid up share capital and a pre-CGT reserve comprising the gain derived from the sale of the Property that will be received by Company A's shareholders (including Company B) be capital proceeds for the cancellation of Company A shares under CGT Event C2 in section 104-25 of the ITAA 1997 and not a deemed dividend under section 47 of the ITAA 1936? | Detailed Reasoning - Answer 3: (70) Yes, the liquidator's distributions sourced from paid up share capital and the sale of the Property will be capital proceed from CGT Event C2 happening and will not be deemed dividends under section 47 of ITAA 1936. | Detailed Reasoning - Application: (71) In this case, the liquidator's distributions sourced from the gains made on the sale of the Property and from the share capital accounts will not be deemed dividends under section 47 of the ITAA 1936. (72) The return of share capital does not represent income derived by Company A and so will not form part of the deemed dividends under section 47 of the ITAA 1936. (73) The effect of subsection 47(1A) of the ITAA 1936 is that capital gains that are disregarded or otherwise not a 'net capital gain that would be included in company's assessable income' will also not be 'income' for the purposes of subsection 47(1) of the ITAA 1936. (74) Therefore, the components of the liquidator's distributions received by the shareholders of Company A that relate to the capital gains made on the Property will also not be income derived by Company A for the purposes of section 47(1) of the ITAA 1936 provided the profits are able to be separately identified. (75) We see no reason why the amounts could not be separately identified in these circumstances, provided adequate records are kept. (76) Consequently, to the extent that the Liquidator's distributions received by the shareholders of Company A are sourced from share capital or the gains on the sale of the Property, the distributions will not be dividends under section 47 of the ITAA 1936. (77) The liquidator's distribution will be capital proceeds from the ending the Company A shares. CGT Event C2 will happen on deregistration of Company A as the shares in Company A will be cancelled in accordance with paragraph 104-25(1)(a) of the ITAA 1997. The timing of CGT event C2 is when Company A is deregistered and ceases to exist, pursuant to subsection 104-25(2) of the ITAA 1997. (78) Consistent with paragraphs 1 and 3 of TD 2001/7, the full amount of the liquidator's distributions will be consideration for the cancellation of shares (the capital proceeds) under CGT Event C2. This will comprise the amounts sourced in pre-CGT gains from the sale of the Property and share capital, as all other retained earnings will be distributed before liquidation. (79) In summary, the liquidator's distribution to Company A shareholders will be capital proceeds from CGT Event C2 happening and no part of the distribution will be deemed dividends under section 47 of the ITAA 1936. | Detailed Reasoning - Question 4: Will the liquidator's distribution sourced only from paid up share capital and a pre-CGT reserve comprising the liquidation distribution received in relation to its shares in Company A that will be received by the Taxpayers be capital proceeds for the cancellation of the Company B shares under CGT Event C2 in section 104-25 of the ITAA 1997 and not a deemed dividend under section 47 of the ITAA 1936? Answer 4 : Yes | Detailed Reasoning - Application: (80) The liquidator's distributions sourced from the cancellation of the Company B shares in Company A will not be deemed dividends under section 47 of the ITAA 1936. (81) The capital derived form the cancellation of the Company B shares in Company A does not represent income that forms part of the deemed dividends under section 47 of the ITAA 1936. (82) The effect of subsection 47(1A) of the ITAA 1936 is that capital gains that are disregarded or otherwise not a 'net capital gain that would be included in company's assessable income' will also not be 'income' for the purposes of subsection 47(1) of the ITAA 1936. (83) The liquidator's distributions sourced from the cancellation of the Company B shares in Company A will be identifiable capital gains, provided the profits are secured separately and adequate records are kept. (84) Company B shares in Company A will be cancelled the shares when Company A is deregistered and ceases to exist. (85) Consistent with paragraphs 1 and 3 of TD 2001/7, the full amount of the liquidator's distributions will be the paid-up share capital and a pre-CGT reserve comprising the liquidation distribution received in relation to its shares in Company A. (86) In summary, these liquidator's distribution will be capital proceeds from the cancellation of Company B shares in Company A, and no part of this distribution will be deemed dividends under section 47 of the ITAA 1936. [1] Although IT 2340 deals with the application of section 160ZZS of the Income Tax Assessment Act 1936 to public entities, the reasoning in paragraph 10 applies equally to changes to fixed percentage interests in private companies.

Documents incorporated into the facts of this Ruling: (40) Certain documents provided by the applicants with the ruling application are incorporated into the facts of this Ruling, and to the extent of any inconsistency between the documents and the description above, the documents prevail. | Assumptions: (41) Company A and Company B will take all necessary steps to separately account for any pre-CGT reserves on liquidation. | (42) The liquidators for Company A and Company B will specifically distribute from pre-CGT reserves on liquidation. | (43) Company A and Company B will cease to exist within 18 months of entering liquidation. | (44) Each of the Shareholders in Company A and Company B hold their shares on capital account; and | (45) Each of the Shareholders in Company A and Company B are Australian tax residents. | (46) There will be no further transfers of shares in Company A and Company B prior to the sale of the Property.