Private ruling: Capital gains tax - Cost base of Aevum Limited shares
Published: September 2011
Ruling period: Year ended 30 June 2011.
Date scheme commenced: 1 July 2007.

Ruling: Q1:  | A1:  | Q2:  | A2: 

Relevant facts and circumstances: When IOR Friendly Society demutualised you were allocated a certain number of shares in IOR Group Limited, (IOR) sometime in August 2007. Later in 2009, you were allocated a further number of IOR shares as a result of the demutualisation, giving you a certain total. In early 2010, IOR merged with Aevum Limited (Aevum) and your IOR shares were exchanged for Aevum shares, (at the rate of 8 Aevum shares for 9 IOR shares). You have chosen scrip for scrip rollover on the capital gain made when your IOR shares were exchanged for Aevum shares, as a result of the merger. Later in 2010, Stockland Development Pty Ltd (Stockland) purchased your Aevum shares in relation to the off market takeover of Aevum. As a result you received a certain amount from Stockland. You have included a copy of the following documents which are to be read with and form part of the scheme for the purpose of this private binding ruling: · Transaction Confirmation Statement addressed to you, of a certain date in 2007, from IOR Group Limited advising you of your share allocation as a result of the demutualisation; · Letter from IOR Group Limited of a certain date in 2009, regarding information about a further share allocation and merger; · Transaction Confirmation Statement addressed to you on a certain date in 2009, from IOR Group Limited advising you of an additional allotment of shares in late 2009 as a result of the demutualisation; · Letter of a certain date in 2010, from Aevum Limited regarding the merger between Aevum Limited and IOR Group Limited; · Transaction Confirmation Statement of a certain date in 2010, from Aevum Limited advising you that as a result of the merger you received a certain number of Aevum shares sometime in early 2010; · Undated fact sheet from Aevum, titled Period in Review - IOR Integration; · Letter of a certain date in late 2010, from Stockland regarding Stockland's offer to acquire your Aevum shares; · Certain pages from the Stockland's Bidder's Statement titled Taxation considerations; · Letter of a certain date in late 2010, from Stockland informing you that Stockland had acquired all of your shares in Aevum and provided you with a cheque; · Transaction Confirmation Statement of a certain date in late 2010, confirming your acceptance of the Stockland's offer and disposing of shares for a certain amount.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10, | Income Tax Assessment Act 1997 Section 109-10, | Income Tax Assessment Act 1997 Subdivision 115-A, | Income Tax Assessment Act 1997 Section 124-780, | Income Tax Assessment Act 1997 Section 124-785, | Income Tax Assessment Act 1997 subsection 316-105(1), | Income Tax Assessment Act 1997 subsection 316-105(2), | Income Tax Assessment Act 1997 subsection 316-105(3) and | Income Tax Assessment Act 1997 Section 316-55.

Reasons for decision: Summary: Summary The first element of the cost base of your Aevum Limited shares is a certain amount. Detailed reasoning You were initially allocated a number of shares in IOR Group Limited (IOR) sometime in 2007 as a result of the implementation of the demutualisation of IOR Friendly Society. You where then allocated a further number of IOR shares, (still as a result of the demutualisation, from the pool of residual shares) because you where an eligible IOR shareholder at the end of the verification period. This brought your total shareholding of IOR shares to a certain number. The first element of the cost base or reduced cost base of a verified member's allocation of shares following demutualisation is calculated in accordance with subsections 316-105(1) and (2) of the Income Tax Assessment Act 1997 (ITAA 1997). For you this amount is a certain amount per share. The first element of the cost base of your IOR shares is therefore the number of shares you have been allocated, multiplied by the amount per share, calculated in accordance with subsections 316-105(1) and (2) of the ITAA 1997. Later, Aevum and IOR merged by way of a scheme of arrangement and you received a certain number of Aevum shares in early 2010, replacing your IOR shares. When a company in which you own shares, (for you this is IOR) merges with another company (for you this is Aevum) and you have chosen scrip for scrip rollover, the rollover allows you to disregard the capital gain made on the IOR shares. You are then taken to have acquired the replacement shares (Aevum shares) for the cost base of the original shares (IOR shares). The rollover also allows you to use the acquisition date of the original IOR shares for the replacement Aevum shares. As a result the first element of the cost base of your Aevum shares is a certain amount. CGT event A1 happened sometime in 2010, when Stockland purchased your Aevum shares. You are therefore required to calculate any capital gain or capital loss on the disposal of your Aevum shares. The capital proceeds for your Aevum shares is a certain amount. The first element of the cost base of your Aevum shares is a certain amount. You will need to determine if there are any second, third, fourth or fifth elements to your cost base. The following fact sheet, 'What is cost base?' has been included for your reference and is located on the ATO website, www.ato.gov.au . In your case, your capital proceeds less your cost base will give you your capital gain on the compulsory sale of your Aevum shares to Stockland. | Detailed Reasoning - Note: Discount capital gain: As the combined period that you have owned your original (IOR) shares and your new (Aevum) shares is greater than 12 months you can choose to use the discount method to calculate your net capital gain. The discount percentage of 50% is applied to the taxable portion of capital gain (capital proceeds less cost base) after you have offset any capital losses in the income tax year and any unapplied net capital losses from earlier years. Generally this method enables you to reduce your capital gain by half.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Subject: Capital gains tax - Cost base of Aevum Limited shares: Question 1 : Is the first element of the cost base of your Aevum Limited shares a certain amount? | Question 2: Did CGT event A1 happen when Stockland Development Pty Ltd purchased your Aevum shares?