Private ruling: Restructure and liquidation of the Head Co tax consolidated group
Published: July 2012

Ruling: The Commissioner was asked whether: | · any part of the liquidator's distribution will be included in the trust's assessable income as a dividend pursuant to section 47 of the Income Tax Assessment Act 1936 (ITAA 1936) in calculating its net income under subsection 95(1) of the ITAA 1936. | · a capital gain made by the trust from CGT event C2 happening to the shares of Head Co as a result of the liquidation will be disregarded by virtue of paragrapgh 104-25(5)(a) of the Income Tax Assessment Act 1997 (ITAA 1997). | · a capital gain made by the trustee of the trust from CGT event G1 (section 104-135 of the ITAA 1997) happening to the shares it owns in Head Co as a result of the liquidation of that company will be disregarded under subsection 104-135(5) of the ITAA 1997. | · the trustee of the trust will be assessed and liable to pay tax on any part of the net income of the trust in respect of the restructure. | The Commissioner ruled that: | · the pre-CGT capital profits reserve is made up of pre-CGT profits from the transfer of the shares in Sub Co to Company A. The amount in the reserve represents non-assessable capital gains and, when distributed to the trust, is not considered a dividend for the purposes of subsection 47(1) of the ITAA 1936. Therefore, no part of the liquidator's distribution will be included as a dividend pursuant to section 47 of the ITAA 1936 in determining the net income of the trust. | · the trustee of the trust acquired its shares in Head Co before 20 September 1985. Therefore, when the trustee's ownership of those shares ends by the shares being cancelled and CGT event C2 happens, a capital gain made from CGT event C2 happening to the shares of Head Co from the liquidation of the company will be disregarded under paragraph 104-25(5)(a) of the ITAA 1997. | · the trustee of the trust acquired all of its shares in Head Co before 20 September 1985, and therefore pursuant to subsection 104-135(5) of the ITAA 1997 can disregard any capital gain from CGT event G1 happening. | · based on the specific circumstances of the case, the trustee of the trust will not be assessed and liable to pay tax on any part of the net income of the trust in respect of the restructure.




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