Private ruling: Scrip for scrip roll-over relief - Subdivision 124-M
Date of advice: 22 April 2026
Published: 13 July 2026
Ruling period: year ending 30 June 2026 | year ending 30 June 2027
Date scheme commenced: 2 April 2026

Ruling: Q1: Will the Trustee be eligible to choose scrip for scrip roll-over relief under Subdivision 124-M of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the exchange of its shares in Holdings Pty Ltd for shares in Company Pty Ltd? | A1: Yes

Relevant facts and circumstances: 1) All entities are Australian residents for Australian Taxation purposes. 2) No entity will be an 'exempt entity' as defined in section 995-1 of the ITAA 1997. 3) Group 1 • A owns 90% of the shares in Company Pty Ltd. B own the remaining 10% of the shares. • Company Pty Ltd and others own shares in subsidiaries. 4) Group 2 • A controls Investment Trust • The trustee for the Investment Trust owns 90% of the units in Unit Trust. • B Pty Ltd acts as trustee for the Unit Trust (Trustee). • The Trustee owns 100% of the shares in Holdings Pty Ltd. The shares in Holdings Pty Ltd were acquired on or after 20 September 1985. All shares held by the Trustee are held on capital account. • Holdings Pty Ltd owns 100% of the shares in a subsidiary. 5) Share Exchange Plan (Plan) 1. By agreement between the Trustee and Company Pty Ltd, the Trustee will exchange all the shares it owns in Holdings Pty Ltd for shares in Company Pty Ltd in a single arrangement. As a result, Company Pty Ltd will become the owner of 100% of the voting shares in Holdings Pty Ltd. 2. The Trustee will make a capital gain when CGT event A1 happens on the disposal of its shares in Holdings Pty Ltd. 3. The market value of Company Pty Ltd shares acquired by the Trustee under the share exchange will be substantially the same as the market value of the Holdings Pty Ltd shares exchanged. 4. The Company Pty Ltd shares and Holdings Pty Ltd shares carry the same voting, capital and dividend rights. 5. The Trustee and Company Pty Ltd will jointly choose to obtain the Subdivision 124-M of the ITAA 1997 - scrip for scrip roll-over. 6. The Trustee will inform Company Pty Ltd, in writing, the cost base of its original interest worked out just before the CGT event happens to that original interest. The Trustee may hold 30% or more of the voting, dividend and capital rights of Company Pty Ltd depending on the final valuations obtained but will not hold 80% or more of the voting, dividend and capital rights of Company Pty Ltd. However, there are associations between the Trustee and other shareholders in Company Pty Ltd for the purposes of section 318 of the Income Tax Assessment Act 1936 (ITAA 1936) that would result in the Trustee and the other shareholder or shareholders between them holding 30% or more of the voting, dividend and capital rights of Company Pty Ltd or 80% or more of the voting, dividend and capital rights of Company Pty Ltd. The ultimate owner of 90% of the shares in Company Pty Ltd is A. A also holds the majority of the indirect interests in the Unit Trust such that the Trustee, together with its associates as defined in section 318 of the ITAA 1936, will hold 30% or more of the voting, dividend and capital rights of Company Pty Ltd and 80% or more of the voting, dividend and capital rights of Company Pty Ltd immediately after the restructure.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 124-M | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 104-10(4) | Income Tax Assessment Act 1997 section 116-20 | Income Tax Assessment Act 1997 subsection 116-20(1) | Income Tax Assessment Act 1997 Division 122 | Income Tax Assessment Act 1997 section 124-780 | Income Tax Assessment Act 1997 paragraph 124-780(1)(a) | Income Tax Assessment Act 1997 subparagraph 124-780(1)(a)(i) | Income Tax Assessment Act 1997 paragraph 124-780(1)(b) | Income Tax Assessment Act 1997 paragraph 124-780(1)(c) | Income Tax Assessment Act 1997 subsection 124-780(2) | Income Tax Assessment Act 1997 subparagraph 124-780(2)(a)(i) | Income Tax Assessment Act 1997 subparagraph 124-780(2)(a)(ii) | Income Tax Assessment Act 1997 paragraph 124-780(2)(b) | Income Tax Assessment Act 1997 subsection 124-780(2A) | Income Tax Assessment Act 1997 paragraph 124-780(2)(c) | Income Tax Assessment Act 1997 subsection 124-780(3) | Income Tax Assessment Act 1997 paragraph 124-780(3)(a) | Income Tax Assessment Act 1997 paragraph 124-780(3)(b) | Income Tax Assessment Act 1997 paragraph 124-780(3)(c) | Income Tax Assessment Act 1997 subparagraph 124-780(3)(c)(ii) | Income Tax Assessment Act 1997 paragraph 124-780(3)(d) | Income Tax Assessment Act 1997 paragraph 124-780(3)(e) | Income Tax Assessment Act 1997 paragraph 124-780(3)(f) | Income Tax Assessment Act 1997 subsection 124-780(4) | Income Tax Assessment Act 1997 paragraph 124-780(4)(a) | Income Tax Assessment Act 1997 paragraph 124-780(4)(b) | Income Tax Assessment Act 1997 subsection 124-780(5) | Income Tax Assessment Act 1997 paragraph 124-780(5)(a) | Income Tax Assessment Act 1997 paragraph 124-780(5)(b) | Income Tax Assessment Act 1997 section 124-782 | Income Tax Assessment Act 1997 subsection 124-783(1) | Income Tax Assessment Act 1997 subsection 124-783(2) | Income Tax Assessment Act 1997 subsection 124-783(3) | Income Tax Assessment Act 1997 subsection 124-783(6) | Income Tax Assessment Act 1997 subsection 124-783(9) | Income Tax Assessment Act 1997 section 124-785 | Income Tax Assessment Act 1997 subsection 124-785(1) | Income Tax Assessment Act 1997 section 124-795 | Income Tax Assessment Act 1997 subsection 124-795(1) | Income Tax Assessment Act 1997 paragraph 124-795(2)(a) | Income Tax Assessment Act 1997 paragraph 124-795(2)(b) | Income Tax Assessment Act 1997 subsection 124-795(3) | Income Tax Assessment Act 1997 subsection 124-795(4) | Income Tax Assessment Act 1997 section 170-260 | Income Tax Assessment Act 1997 Division 615 | Income Tax Assessment Act 1997 section 975-500 | Income Tax Assessment Act 1997 section 975-505 | Income Tax Assessment Act 1997 section 995-1 | Income Tax Assessment Act 1997 subsection 995-1(1) | Income Tax Assessment Act 1936 section 318 | Income Tax Assessment Act 1936 subsection 318(1) | Income Tax Assessment Act 1936 paragraph 318(1)(a) | Income Tax Assessment Act 1936 paragraph 318(1)(b) | Income Tax Assessment Act 1936 paragraph 318(1)(c) | Income Tax Assessment Act 1936 paragraph 318(1)(d) | Income Tax Assessment Act 1936 paragraph 318(1)(e) | Income Tax Assessment Act 1936 subsection 318(2) | Income Tax Assessment Act 1936 paragraph 318(2)(a) | Income Tax Assessment Act 1936 paragraph 318(2)(b) | Income Tax Assessment Act 1936 paragraph 318(2)(c) | Income Tax Assessment Act 1936 paragraph 318(2)(d) | Income Tax Assessment Act 1936 paragraph 318(2)(e) | Income Tax Assessment Act 1936 paragraph 318(2)(f) | Income Tax Assessment Act 1936 subsection 318(3) | Income Tax Assessment Act 1936 paragraph 318(3)(a) | Income Tax Assessment Act 1936 paragraph 318(3)(b) | Income Tax Assessment Act 1936 paragraph 318(3)(c) | Income Tax Assessment Act 1936 subsection 318(4) | Income Tax Assessment Act 1936 paragraph 318(4)(a) | Income Tax Assessment Act 1936 paragraph 318(4)(b) | Income Tax Assessment Act 1936 paragraph 318(4)(c) | Income Tax Assessment Act 1936 subsection 318(5) | Income Tax Assessment Act 1997 section 116-20 | Income Tax Assessment Act 1936 subsection 318(5)(a) | Income Tax Assessment Act 1936 paragraph 318(5)(b) | Income Tax Assessment Act 1936 paragraph 318(5)(c) | Income Tax Assessment Act 1936 subsection 318(6) | Income Tax Assessment Act 1936 paragraph 318(6)(a) | Income Tax Assessment Act 1936 paragraph 318(6)(b) | Income Tax Assessment Act 1936 paragraph 318(6)(c) | Income Tax Assessment Act 1936 subsection 318(7) | Income Tax Assessment Act 1936 paragraph 318(7)(a) | Income Tax Assessment Act 1936 paragraph 318(7)(b)

Reasons for decision: Summary: The Trustee will be eligible to obtain roll-over relief under Subdivision 124-M of the ITAA 1997 in respect of the exchange of its shares in Holdings Pty Ltd for shares in Company Pty Ltd. | Detailed Reasoning - Detailed reasoning: All legislative references are to the Income Tax Assessment Act 1997 (ITAA 1997), unless otherwise stated. | Detailed Reasoning - CGT Event A1: CGT event A1 will occur when the Trustee disposes of its shares in Holdings Pty Ltd to Company Pty Ltd, as there will be a change in ownership (section 104-10). The Trustee will make a capital gain from CGT event A1 happening if the capital proceeds from the disposal of its shares in Holdings Pty Ltd exceed the cost base of those shares (subsection 104-10(4)). The capital gain is the amount of the excess. The Trustee will make a capital loss from CGT event A1 happening if the capital proceeds are less than the reduced cost base of the Holdings Pty Ltd shares (subsection 104-10(4)). The capital loss is the amount of the difference. The capital proceeds from a CGT event are the total of the money, and the market value of any property, received or entitled to be received (the market value is worked out as at the time the CGT event happens) (subsection 116-20(1)). The Trustee will make a capital gain on the disposal of its shares in the Holdings Pty Ltd. | Detailed Reasoning - Availability of scrip for scrip roll-over if a capital gain is made: Subdivision 124-M allows a shareholder to choose roll-over where post-CGT shares are replaced with shares in another entity. A taxpayer may obtain a roll-over under section 124-785 if the conditions in section 124-780 are satisfied. Section 124-780 contains a number of conditions for, and exceptions to, the eligibility of a shareholder to choose scrip for scrip roll-over. | Detailed Reasoning - Requirements to qualify for scrip for scrip roll-over in respect of the Original Entity shares: The conditions and exceptions that are relevant to the scheme are: | Detailed Reasoning - 1. Shares in the original company are exchanged for shares in another replacement company: Paragraph 124-780(1)(a) requires an entity (the Original Interest Holder ) to exchange a share (the entity's Original Interest ) in a company (the Original Entity) for a share (the holder's Replacement Interest ) in another company. A share in a company has the meaning given by subsection 995-1(1) and means a share in the capital of the company, and includes stock. This requirement will be satisfied as the Trustee (the Original Interest Holder ) will exchange its shares in Holdings Pty Ltd (the Original Entity ) for shares in Company Pty Ltd (the Replacement Entity) . | Detailed Reasoning - 2. The exchange is in consequence of a single arrangement that satisfies subsection (2) or (2A) (paragraph 124-780(1)(b)): Paragraph 124-780(1)(b) requires that the exchange (of shares) is in consequence of a single arrangement. The definition of 'arrangement' in subsection 995-1(1) is: any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings. In consequence of There is no legislative guidance as to when an exchange would occur 'in consequence of' an arrangement for the purposes of the scrip for scrip roll-over provisions. The Explanatory Memorandum to New Business Tax System (Capital Gains Tax) Bill 1999, being the Bill that introduced Subdivision 124-M of the ITAA 1997, states at paragraph 2.9 that scrip for scrip roll-over is available if 'the exchange is in consequence of an offer'. At paragraph 2.23 of that Explanatory Memorandum, it further states that: an acquisition occurs in consequence of an offer if the acquisition occurs as a result of, or effect of, the offer. This means that the offer needs to occur before the acquisition and have a causal connection or other connection with it. The exchange of the shares in Randall Holdings for the shares in Rinkglen will be in consequence of an arrangement. Single arrangement Taxation Ruling TR 2005/19 Income tax: scrip for scrip roll-over arrangements - application of Subdivision 124-M of the Income Tax Assessment Act 1997 - Part IVA of the Income Tax Assessment Act 1936 (TR 2005/19) sets out the Commissioner's views on the requirements of Subdivision 124-M and states at paragraph 32: While the term 'arrangement' is defined very broadly, there is no definition of the term 'single arrangement'. Paragraph 11.23 of the Explanatory Memorandum to the New Business Tax System (Miscellaneous) Bill (No. 2) 2000 details a number of factors that may assist in determining what constitutes a single arrangement: What constitutes a single arrangement is a question of fact. Relevant factors in determining whether what takes place is part of a single arrangement would include, but not be limited to, whether there is more than one offer or transaction, whether aspects of an overall transaction occur contemporaneously, and the intention of the parties in all the circumstances as evidenced by objective facts. In TR 2005/19a detailed scheme is set out by way of illustration at paragraph 12. Relevantly, the scheme involves the following elements (note that in the interests of brevity, the steps have been significantly simplified and summarised below): TR 2005/19, at paragraph 34, notes that 'under the single arrangement', 100% of the shares held by Company A are, at a point in time and pursuant to a series of transaction documents, exchanged for a certain number of shares in Company D in satisfaction of the requirement in paragraph 124-780(1)(b) of the ITAA 1997. This indicates that notwithstanding that there may be a series of related steps involved in a broader commercial restructure, in determining whether a single arrangement exists, it is necessary to focus on the particular step under which the subject shares are actually exchanged. That is, the existence of other related steps should not detract from the potential existence of a single arrangement that is the focus of roll-over relief under Subdivision 124-M. In Commissioner of Taxation v Fabig [2013] FCAFC 99; 215 FCR 122; 95 ATR 660 (Fabig), amongst other things, the Court considered the identification of the relevant 'arrangement' for the purposes of Subdivision 124-M of the ITAA 1997. Relevantly, in Fabig, the acquiring entity had made a number of pre-contractual offers and various iterations of the draft Share Purchase Agreement were negotiated between the parties. These were held to not form part of the relevant arrangement. Rather the arrangement relevant to Subdivision 124-M of the ITAA 1997 was held to be the contractual relationship entered into by the parties for the share exchange. The single arrangement requirement will be satisfied as under the Plan, Company Pty Ltd will acquire all the shares in Holdings Pty Ltd in exchange for Trustee acquiring shares in Company Pty Ltd. There is only one offer or transaction, the aspects of the overall transaction occur contemporaneously, and the intention of the parties in all the circumstances as evidenced by objective facts is the only arrangement being undertaken as described in the Plan. The Plan constitutes a 'single arrangement'. Conditions for arrangement Paragraph 124-780(1)(b) requires that the exchange (of shares) is in consequence of a single arrangement that satisfies subsection 124-780(2) or subsection 124-780(2A). The requirements in subsection 124-780(2) are: a) The acquiring entity becomes the owner of 80% or more of the original entity. Subparagraph 124-780(2)(a)(i) requires that the arrangement must result in the Acquiring Entity that is not a member of a wholly-owned group, becoming the owner of 80% or more of the voting shares of the Original Entity . | Detailed Reasoning - Wholly-owned group: Section 975-500 provides that 2 companies are members of the same wholly-owned group if: Section 975-505 provides that a company (the subsidiary company) is a 100% subsidiary of another company (the holding company) if all the shares in the subsidiary are beneficially owned by: A company (other than the subsidiary company) is a 100% subsidiary of the holding company only if: The subsidiary company is not a 100% subsidiary of the holding company if a person is, or will be at some future time, in a position to affect rights, in relation to the subsidiary company, of: A person is taken to be in a position to affect rights if that person has a right, power, or option to acquire those rights or to do an act that would prevent the holder of the rights from exercising them for its own benefit. A company is the ultimate holding company of a wholly-owned group if it is not a 100% subsidiary of another company in the group. In this case there are no two companies that satisfy the requirements of section 975-500. This condition will be satisfied as Company Pty Ltd is not a member of a wholly-owned group and will acquire 100% of the voting shares in Holdings Pty Ltd. It is not necessary to consider subparagraph 124-780(2)(a)(ii) as Company Pty Ltd (i.e. the Acquiring Entity ) is not a member of a wholly-owned group. b) All owners of voting shares can participate Paragraph 124-780(2)(b) requires that the arrangement must be one in which at least all owners of voting shares in the Original Entity (except the Acquiring Entity or members of the Acquiring Entity's wholly-owned group) could participate. This requirement will be satisfied because the Trustee owns 100% of the shares in Holdings Pty Ltd and therefore the only shareholder that can participate. c) Participation is on substantially the same terms for all owners of interests of a particular type in the original entity Paragraph 124-780(2)(c) requires that the arrangement must be one in which participation was available on substantially the same terms for all of the owners of interests of a particular type in the Original Entity . All shareholders of Holdings Pty Ltd will participate in the Plan on substantially the same terms. This requirement will be satisfied because the Trustee owns 100% of the shares in Holdings Pty Ltd and is the only shareholder. Therefore, there are no terms of the arrangement available for one shareholder that are not available to others. This condition will be satisfied. As the above requirements will be met, subsection 124-780(2) will be satisfied and subsection 124-780(2A) does not need to be considered. | Detailed Reasoning - 3. Conditions for roll-over in subsection 124-780(3) are satisfied (paragraph 124-780(1)(c)): Paragraph 124-780(1)(c) requires that the conditions in subsection 124-780(3) are satisfied. These conditions must be satisfied in relation to each of the Original Entity shares for which a shareholder wishes to choose scrip for scrip roll-over. These conditions are: a) The original interest holder acquired its original interest on or after 20 September 1985 (paragraph 124-780(3)(a)) Paragraph 124-780(3)(a) requires that the Original Interest Holder acquired its Original Interest on or after 20 September 1985. The Trustee acquired all the shares in Holdings Pty Ltd on or after 20 September 1985. Therefore, this condition is satisfied. b) Shareholder would otherwise make a capital gain from a CGT event happening in relation to its original interest (paragraph 124-780(3)(b)) Paragraph 124-780(3)(b) requires that, apart from the roll-over, the Original Interest Holder would make a capital gain from a CGT event happening in relation to its Original Interest . A capital gain will be made from CGT event A1 happening on the disposal of Holdings Pty Ltd shares under the arrangement if the capital proceeds from the disposal are more than the cost base of those shares. In accordance with section 116-20, the capital proceeds received by the Trustee under this CGT event will be the market value of the shares it receives in Company Pty Ltd. As this amount will be greater than Trustee's cost base of its shares in the Holdings Pty Ltd, the Trustee will make a capital gain when CGT event A1 occurs. c) Shareholders receive replacement interests in the acquiring entity or the ultimate holding company (paragraph 124-780(3)(c)) Paragraph 124-780(3)(c) requires that the Replacement Interest is in the company that is the Acquiring Entity or the ultimate holding company of the wholly-owned group of which the Acquiring Entity is a member. As the Trustee will receive replacement shares in Company Pty Ltd (which is the Acquiring Entity and is not a member of a wholly-owned group), this condition will be satisfied. Note: it is noted that it is not necessary to consider subparagraph 124-780(3)(c)(ii) as the Replacement Entity (i.e. the Acquiring Entity ) is not a member of a wholly-owned group. d) The Original Interest Holder chooses to obtain roll-over, or the Original Interest Holder and Replacement Entity choose to jointly obtain roll-over (paragraph 124-780(3)(d)) Paragraph 124-780(3)(d) of the ITAA 1997 provides that the Original Interest Holder must choose to obtain scrip for scrip roll-over or, if section 124-782 of the ITAA 1997 applies to it for the arrangement, it and the Replacement Entity must jointly choose to obtain the roll-over. Section 124-782 applies if an Original Interest Holder obtains a roll-over and is a 'significant stakeholder' or a 'common stakeholder' for the arrangement. Subsections 124-783(1) and (2) provide that an Original Interest Holder will be a significant stakeholder for an arrangement if it had a significant stake: • in the Original Entity before the arrangement started, and • in the Replacement Entity just after the arrangement was completed (subsection (1)) or is an associate of the Replacement Entity just after the arrangement was completed. Subsection 124-783(6) provides that an entity has a significant stake in a company if between it and its associates, the entity holds shares carrying 30% or more of the voting, dividend or capital rights of the company. Further, subsection 124-783(3) provides that an Original Interest Holder will be a common stakeholder for an arrangement if it had a common stake in the original entity just before the arrangement started and a common stake in the Replacement Entity just after the arrangement was completed. Subsection 124-783(9) provides that an entity, or 2 or more entities, have a common stake in the Original Entity just before the arrangement started and in the Replacement Entity just after the arrangement was completed if the entity or entities, and their associates, between them held 80% or more of the voting, dividend or capital rights before and after the arrangement. 'Associate' is defined in section 995-1 by reference to the definition in section 318 of the ITAA 1936. Subsection 318(1) [Associates of a natural person] For the purposes of this Part, the following are associates of an entity (in this subsection called the primary entity ) that is a natural person (otherwise than in the capacity of trustee): (a) relative of the primary entity; (b) a partner of the primary entity or a partnership in which the primary entity is a partner; (c) if a partner of the primary entity is a natural person otherwise than in the capacity of trustee - the spouse or a child of that partner; (d) a trustee of a trust where the primary entity, or another entity that is an associate of the primary entity because of another paragraph of this subsection, benefits under the trust; (e) a company where: (i) the company is sufficiently influenced by: (A) the primary entity; or (B) another entity that is an associate of the primary entity because of another paragraph of this subsection; or (C) another company that is an associate of the primary entity because of another application of this paragraph; or (D) 2 or more entities covered by the preceding sub-subparagraphs; or (ii) a majority voting interest in the company is held by: (A) the primary entity; or (B) the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the preceding paragraphs of this subsection; or (C) the primary entity and the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and because of the preceding paragraphs of this subsection. | Detailed Reasoning - 318(2) [Associates of a company]: For the purposes of this Part, the following are associates of a company (in this subsection called the primary entity ): (a) a partner of the primary entity or a partnership in which the primary entity is a partner; (b) if a partner of the primary entity is a natural person otherwise than in the capacity of trustee - the spouse or a child of that partner; (c) a trustee of a trust where the primary entity, or another entity that is an associate of the primary entity because of another paragraph of this subsection, benefits under the trust; (d) another entity (in this paragraph called the controlling entity ) where: (i) the primary entity is sufficiently influenced by: (A) the controlling entity; or (B) the controlling entity and another entity or entities; or (ii) a majority voting interest in the primary entity is held by: (A) the controlling entity; or (B) the controlling entity and the entities that, if the controlling entity were the primary entity, would be associates of the controlling entity because of subsection (1), because of subparagraph (i) of this paragraph, because of another paragraph of this subsection or because of subsection (3); (e) another company (in this paragraph called the controlled company ) where: (i) the controlled company is sufficiently influenced by: (A) the primary entity; or (B) another entity that is an associate of the primary entity because of another paragraph of this subsection; or (C) a company that is an associate of the primary entity because of another application of this paragraph; or (D) 2 or more entities covered by the preceding sub-subparagraphs; or (ii) a majority voting interest in the controlled company is held by: (A) the primary entity; or (B) the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the other paragraphs of this subsection; or (C) the primary entity and the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and the other paragraphs of this subsection; (f) any other entity that, if a third entity that is an associate of the primary entity because of paragraph (d) of this subsection were the primary entity, would be an associate of that third entity because of subsection (1), because of another paragraph of this subsection or because of subsection (3). 318(3) [Associates of a trustee] For the purposes of this Part, the following are associates of a trustee (in this subsection called the primary entity ): (a) any entity that benefits under the trust; (b) if a natural person benefits under the trust - any entity that, if the natural person were the primary entity, would be an associate of that natural person because of subsection (1) or because of this subsection; (c) if a company is an associate of the primary entity because of paragraph (a) or (b) of this subsection - any entity that, if the company were the primary entity, would be an associate of the company because of subsection (2) or because of this subsection. 318(4) [Associates of a partnership] For the purposes of this Part, the following are associates of a partnership (in this subsection called the primary entity ): (a) a partner in the partnership; (b) if a partner in the partnership is a natural person - any entity that, if that natural person were the primary entity, would be an associate of that natural person because of subsection (1) or (3); (c) if a partner in the partnership is a company - any entity that, if the company were the primary entity, would be an associate of the company because of subsection (2) or (3). 318(5) [Public unit trust entity] In determining, for the purposes of this section, whether an entity is an associate of another entity at a particular time (in this subsection called the test time ): (a) an entity (in this subsection called the public unit trust entity ) that, apart from this subsection, is the trustee of a public unit trust at the test time is to be treated as if it were a company instead of a trustee; and (b) the public unit trust entity is taken to be sufficiently influenced by another entity or other entities if the public unit trust entity is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the other entity or other entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and (c) another entity or other entities are taken to hold a majority voting interest in the public unit trust entity if either of the following percentages is not less than 50 %: (i) the percentage of the income of the trust represented by the share of the income to which the other entity or other entities are entitled, or that the other entity or other entities are entitled to acquire; (ii) the percentage of the corpus of the trust represented by the share of the corpus to which the other entity or other entities are entitled, or that the other entity or other entities are entitled to acquire. 318(6) [Interpretation] For the purposes of this section: (a) a reference to an entity benefiting under a trust is a reference to the entity benefiting, or being capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust, either directly or through any interposed companies, partnerships or trusts; and (b) a company is sufficiently influenced by an entity or entities if the company, or its directors, are accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the entity or entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and (c) an entity or entities hold a majority voting interest in a company if the entity or entities are in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company. | Detailed Reasoning - 318(7): In this section and any other provision of this Act that has effect for the purposes of this section, a reference to the spouse of a person does not include: (a) a spouse who is legally married to the person but living separately and apart from the person on a permanent basis; or (b) a spouse within the meaning of paragraph (a) of the definition of spouse in subsection 995-1(1) of the Income Tax Assessment Act 1997 who is living separately and apart from the person on a permanent basis. The Trustee may hold 30% or more of the voting, dividend and capital rights of Company Pty Ltd depending on the final valuations obtained but will not hold 80% or more of the voting, dividend and capital rights of Company Pty Ltd. However, there are associations between the Trustee and other shareholders of Company Pty Ltd for the purposes of section 318 of the ITAA 1936 that would result in the Trustee and the other shareholder or shareholders between them holding 30% or more of the voting, dividend and capital rights of Company Pty Ltd or 80% or more of the voting, dividend and capital rights of Company Pty Ltd. The ultimate owner of 90% of the shares in Company Pty Ltd is A. A also holds the majority of the indirect interests in the Unit Trust such that the Trustee, together with its associates as defined in section 318 of the ITAA 1936, will hold 30% or more of the voting, dividend and capital rights of Company and 80% or more of the voting, dividend and capital rights of Company Pty Ltd immediately after the restructure. The Trustee will either be a significant or common stakeholder for the purpose of section 124-782. As section 124-782 applies to the arrangement, to satisfy paragraph 124-780(3)(d), the Trustee and Company Pty Ltd will jointly choose for the 124-M CGT roll-over to apply. This condition will be satisfied. e) Significant or common stakeholders notify the replacement entity of its cost base in the original interest Paragraph 124-780(3)(e) provides that if section 124-782 applies, the Original Interest Holder informs the Replacement Entity (also Acquiring Entity) in writing of the cost base of its Original Interest worked out just before a CGT event happened in relation to it. The Trustee will be a significant or common stakeholder and will notify Company Pty Ltd in writing of the cost base of its shares in Holdings Pty Ltd. Therefore, this condition will be satisfied. f) If an acquiring entity is a member of a wholly-owned group, no member of the group issues equity (other than a replacement interest), or owes new debt, under the arrangement Paragraph 124-780(3)(f) does not apply as the Replacement Entity is not a member of a wholly-owned group. | Detailed Reasoning - 4. Further conditions are satisfied where the transaction is non-arm's length (subsection 124-780(4) and subsection 124-780(5)).: Subsection 124-780(4) states that the conditions specified in subsection 124-780(5) must be satisfied if the Original Interest Holder and the Acquiring Entity did not deal with each other at arm's length and: a) neither the Original Entity nor the Replacement Entity had at least 300 members just before the arrangement started (paragraph 124-780(4)(a)); or b) the Original Interest Holder , the Original Entity and the Acquiring Entity were all members of the same 'linked group' (as defined in section 170-260) just before that time (paragraph 124-780(4)(b)). | Detailed Reasoning - Arm's length: TR 2005/19: provides: 59. The question whether the parties are dealing with each other at arm's length is not decided by asking whether the parties were at arm's length to each other. Subsection 995-1(1) of the ITAA 1997 provides: arm's length : in determining whether parties deal at arm's length , consider any connection between them and any other relevant circumstance. 60. The fact that there is no ownership connection between the parties is not determinative, on its own, of whether the parties deal with each other at arm's length. The question is whether the parties dealt with each other at arm's length; The Trustee for the Estate of the late AW Furse No. 5 Will Trust v. FC of T 91 ATC 4007 at 4014-4015; (1990) 21 ATR 1123 at 1132. This will be determined by considering the terms of the dealing and any other relevant consideration (as outlined in paragraphs 65 to 71). 61. In Granby Pty Ltd v. FC of T 95 ATC 4240 at 4243; (1995) 30 ATR 400 at 403 Lee J stated that the provision 'dealing with each other at arm's length' invited an analysis of the manner in which the parties conduct themselves in forming the transaction. The question is whether the parties behaved in the manner in which parties at arm's length would be expected to behave in conducting their affairs and the expression means, at least, that the parties have acted severally and independently in forming their bargain. 62. Further, Lee J stated (at ATC 4244; ATR 403-404) that: If the parties to the transaction are at arm's length it will follow, usually, that the parties will have dealt with each other at arm's length. That is, the separate minds and wills of the parties will be applied to the bargaining process whatever the outcome of the bargain may be. However, this will not be the case where the parties collude to achieve a particular result, or where one of the parties submits the exercise of its will to the discretion of the other. In such a case the lack of the exercise of an independent will in the formation of the transaction would indicate a lack of real bargaining. 63. In Collis v. FC of T 96 ATC 4831; (1996) 33 ATR 438 ( Collis ) the Federal Court found that the parties were not dealing at arm's length because one party was indifferent to the allocation of the sale price for the parcel of land. This indifference was indicative of a submission of one party's will to the other party's wishes which demonstrated a lack of arm's length dealing. The structure of subsections 124-780(4) and 124-780(5) indicate the phrase 'dealing at arm's length' is not to be construed as meaning the parties exchange their shares for a fair price or market value. A condition to be met in subsection 124-780(5), that the market value of the capital proceeds received by the shareholders is substantially the same as the market value of their original interest, must be met only if the O riginal Interest Holder and Acquiring Entity 'did not deal with each other at arm's length' and fall within paragraphs 124-780(4)(a) or (b). The Commissioner therefore considers that it is necessary to consider the relationship or connection between the shareholder of Holdings Pty Ltd and Company Pty Ltd. These entities are indirectly owned 90% by A immediately before the Plan, Accordingly, it is considered that the parties will not be act at arm's length in respect of the share exchange as a result of the nature and circumstances of the dealing. Consequently, as the dealing was not at arm's length and as both Holdings Pty Ltd and Company Pty Ltd had less than 300 members just before the arrangement (subsection 124-780(4)) the conditions in subsection 124-780(5)) must be considered. | Detailed Reasoning - Further conditions must be satisfied: Paragraph 124-780(5)(a) requires the market value of the Original Interest Holder 's capital proceeds for the exchange to be at least substantially the same as the market value of its Original Interest . The Trustee will receive shares in Company Pty Ltd in exchange for its Holdings Pty Ltd shares that are substantially the same as the market value of their Holdings Pty Ltd shares exchanged and nothing else. Consequently, this condition will be satisfied. Paragraph 124-780(5)(b) requires the Replacement Interest is to carry the same kind of rights and obligations as those attached to its Original Interest . The Company Pty Ltd shares exchanged for the shares in Holdings Pty Ltd which carry the same kind of rights and obligations as those attached to the Holdings Pty Ltd shares. Consequently, the conditions in subsection 124-780(5) will be met. | Detailed Reasoning - Exceptions to obtaining scrip for scrip roll-over are not applicable: Section 124-795 sets out the circumstances where roll-over under Subdivision 124-M is not available. Subsection 124-795(1) provides that the Original Interest Holder cannot obtain the roll-over if it is a foreign resident just before it stops owning the Original Interest , unless the Replacement Interest is a taxable Australian asset. This exception does not apply as the Trustee is not a foreign resident just before the share exchange. Paragraph 124-795(2)(a) provides that the roll-over is not available if a capital gain the Original Interest Holder might make from the Replacement Interest would be disregarded, except because of a roll-over. For example, if a capital gain is disregarded because the asset is trading stock. This exception will not apply as the Trustee will hold the Company Pty Ltd shares on capital account and therefore any capital gain the Trustee might make from the Company Pty Ltd shares will not be disregarded, except to the extent there is roll-over relief in accordance with Subdivision 124-M. Paragraph 124-795(2)(b) provides that the roll-over is not available if the Original Interest Holder and the Acquiring Entity are members of the same wholly owned group just before the share exchange and the acquiring entity is a foreign resident. This exception will not apply as the Trustee and Company Pty Ltd are not members of the same wholly owned group just before the share exchange and Company Pty Ltd is not a foreign resident. Subsection 124-795(3) provides that the roll-over is not available if the Original Interest Holder can choose a roll-over under Division 122 or 615.The exception under subsection 124-795(3) does not apply as the Trustee cannot choose a roll-over under Division 122 or Division 615. Division 122 deals with the disposal of assets to a wholly-owned company which is not relevant to the Plan arrangement. Broadly, roll-over under Division 615 is available for business restructures where a company is wholly-owned by two or more entities that exchange their shares in the original entity for shares in an interposed company. However, one of the requirements to access a Division 615 roll-over is that immediately after completion the exchanging members must own all the shares in the interposed company, or entities other than those members must own no more than five shares in the interposed company, and the proportional market value of those shares must make it reasonable to treat the exchanging member as owning all the shares. After implementation of the Plan, entities other than the exchanging members will continue to hold significantly more than five shares. As neither the Division 122 nor Division 615 roll-over can apply to this transaction, the exception in subsection 124-795(3) will not apply. Subsection 124-795(4) provides that roll-over is not available if the acquiring entity elects for Subdivision 124-M to not apply for the Original Interest Holders and the Original Interest Holders must be advised of this election before the exchange of shares. Company Pty Ltd will not make such a choice, and therefore the exception under subsection 124-795(4) will not apply. | Detailed Reasoning - Conclusion: The Trustee is eligible to choose to obtain CGT roll-over relief under Subdivision 124-M with respect to the exchange of its shares in Holdings Pty Ltd under the Plan. Where the roll-over is chosen, any capital gain on the trustee's shares in Holdings Pty Ltd exchanged under the Plan is disregarded pursuant to subsection 124-785(1).

Does Part IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar . | Company A contemplating a disposal of 100% of its shares in Company B; | Company C incorporates two special purpose companies, Company D and Company E; and | Company C making a bid for Company B which results in Company A disposing of its shares in Company B in exchange for shares in Company D, the company nominated by Company C to acquire the Company B shares. | one of the companies is a 100% subsidiary of the other company; or | each of the companies is a 100% subsidiary of the same third company. | one or more 100% subsidiaries of the holding company; or | the holding company and one or more 100% subsidiaries of the holding company. | it is a 100% subsidiary of the holding company; or | it is a 100% subsidiary of a 100% subsidiary of the holding company.