Private ruling: Demerger
Published: March 2012
Ruling period: Financial year ended 30 June 2012.
Date scheme commenced: 1 July 2011.

Ruling: Q1: Will the proposed arrangement satisfy the requirements for demerger relief under Division 125 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1:  | Q2: Will the capital gain or loss realized by Company H as a result of the demerger be disregarded under section 125-155 of the ITAA 1997? | A2:  | Q3: Will the Company H shareholders be eligible for roll-over relief under section 125-55 of the ITAA 1997 in relation to the demerger? | A3:  | Q4: Will the first element of the cost base and reduced cost base of the Company S shares acquired by the Company H shareholders under the demerger, be the sum of their original cost bases (just before the demerger) of the Company H shares, apportioned over those Company H and Company S shares on a reasonable basis having regard to the market values (just after the demerger) of the Company H shares and Company S shares, or a reasonable approximation of those market values pursuant to section 125-80(2) and (3) of the ITAA 1997? | A4:  | Q5: Will the Commissioner treat any part of the issue of the Company S shares to the Company H shareholders as a demerger dividend that is assessable under section 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) in the hands of the Company H shareholders? | A5:  | Q6: Will the Commissioner make a determination under subsection 45B(3) of the ITAA 1936 that section 45BA of the ITAA 1936 or section 45C of the ITAA 1936 applies to the whole or any part of any benefit provided to the shareholders of Company H? | A6: No.

Relevant facts and circumstances: Company H is proposing to demerge its subsidiary Company S. Company H will provide its shareholders with all of the shares it currently holds in Company S. Company H holds non-majority interests in some other companies. Company H and Company S are Australian residents and are not superannuation funds. A number of commercial reasons have been provided for the demerger.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6 | Income Tax Assessment Act 1936 Section 44. | Income Tax Assessment Act 1936 Section 45B | Income Tax Assessment Act 1936 Section 45BA | Income Tax Assessment Act 1936 Section 45C | Income Tax Assessment Act 1936 Section 177A | Income Tax Assessment Act 1936 Section 177D | Income Tax Assessment Act 1997 Division 110 | Income Tax Assessment Act 1997 Division 112 | Income Tax Assessment Act 1997 Division 125 | Income Tax Assessment Act 1997 Section 125-55 | Income Tax Assessment Act 1997 Section 125-65 | Income Tax Assessment Act 1997 Section 125-70 | Income Tax Assessment Act 1997 Section 125-80 | Income Tax Assessment Act 1997 Section 125-155 | Income Tax Assessment Act 1997 Section197-50


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