Private ruling: Employer share schemes
Date of advice: 30 November 2021
Published: February 2022

Ruling: Q1: Will a deferred taxing point arise under section 83A-120 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the securities held in Entity X as a result of the implementation of the demerger scheme? | A1: No. | Q2: Are the new securities issued by Entity Y to the holders of securities in Entity X as a result of the implementation of the demerger scheme ESS interests provided under an employee share scheme within the meaning of subsection 83A-10(2) of the ITAA 1997? | A2: No. | Q3: Does the issue of the new securities issued by Entity Y to the holders of securities in Entity X as a result of the implementation of the Demerger scheme, give rise to the derivation of assessable income in their hands under any one or more of the following sections: • Section 6-5 of the ITAA 1997, • Section 15-2 of the ITAA 1997; or • Section 44(1) of the Income Tax Assessment Act 1936 ? | A3: No. | Q4: Do CGT events: • C2 under subsection 104-25(1) of the ITAA 1997, • D1 under subsection 104-35(1) of the ITAA 1997, or • H2 under subsection 104-155(1) of the ITAA 1997 happen when, as part of the demerger involving a return of share capital to shareholders in Entity X, Entity X securities receive equivalent securities in Entity Y as compensation for the loss in value of their Entity X securities? | A4: No. | Q5: Will the first element of the cost base and the reduced cost base of the ownership interests in Entity X and Entity Y held by Entity X security holders be subject to adjustment under subsection 125-80(2) of the ITAA 1997? | A5: Yes. | Q6: Will the Entity X security holders be taken, for the purpose of Division 115 of the ITAA 1997, to have acquired a proportionate number of equivalent securities in Entity Y on the same date as their ownership interests in Entity X were acquired, pursuant to item 2 of the table at subsection 115-30(1)? | A6: Yes.

Relevant facts and circumstances: Entity X applied for a private binding ruling in respect to the issue of new securities in Entity Y as a result of a demerger.

Relevant legislative provisions: Section 83A-120 of the ITAA 1997 | Section 83A-10 of the ITAA 1997 | Section 83A-340 of the ITAA 1997 | Section 83A-105 of the ITAA 1997 | Section 83A-20 of the ITAA 1997 | Section 83A-45 of the ITAA 1997 | Section 6-5 of the ITAA 1997 | Section 15-2 of the ITAA 1997 | Section 44 of the ITAA 1936 | Subsection 6(1) of the ITAA 1936 | Section 104-25 of the ITAA 1997 | Section 108-5 of the ITAA 1997 | Section 104-35 of the ITAA 1997 | Section 104-155 of the ITAA 1997 | Section 125-80 of the ITAA 1997 | Section 125-90 of the ITAA 1997 | Section 115-30 of the ITAA 1997 | Section 115-25 of the ITAA 1997 | Subsection 995-1(1) of the ITAA 1997 | Section 112-115 of the ITAA 1997