Private ruling: Proposed restructure
Date of advice: 11 May 2026
Published: 20 July 2026
Ruling period: Year ending 31 XXX 20XX
Date scheme commenced: Year ending 31 XXX 20XX

Ruling: Q1: Do the shares in AusCo1 satisfy the definition of taxable Australian property under section 855-15 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: If the answer to question 1 is 'no', will section 855-10 of the ITAA 1997 apply to disregard any capital gain or loss arising from the disposal of the shares in AusCo1? | A2: Yes. | Q3: Are ForeignCo3 and ForeignCo2 eligible to choose to obtain roll-over relief under subdivision 126-B of the ITAA 1997 to disregard the capital gain arising from the sale of shares in AusCo2 to ForeignCo2? | A3: Yes. | Q4: If the answer to question 3 is 'yes', will any capital gain derived by ForeignCo3 on the disposal of the shares in AusCo2 to ForeignCo2 be disregarded under subsection 126-60(1) of the ITAA 1997? | A4: Yes. | Q5: If the answer to question 3 is 'yes', will ForeignCo2 inherit the first element of the cost base of the shares in AusCo2 pursuant to subsection 126-60(2) of the ITAA 1997? | A5: Yes. | Q6: If the answer to question 3 is 'yes', will a choice by ForeignCo3 to obtain roll-over relief to disregard the capital gain arising from the sale of shares in AusCo2 to ForeignCo2, pursuant to paragraph 126-55(1)(b), give rise to a tax benefit under subsection 177C(1) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A6: No.

Relevant facts and circumstances: Current Group structure ForeignCo1 is a tax resident company of Country A and is listed on the Country A Stock Exchange. ForeignCo1 wholly owns ForeignCo2, a tax resident company of Country B. ForeignCo2 wholly owns ForeignCo3. ForeignCo3 was incorporated in Country B and is not an Australian resident company for income tax purposes. There has been no change to the shares held in ForeignCo3 in the previous 5 years. ForeignCo3 wholly owns AusCo1 and AusCo2. AusCo2 was incorporated in 20YY. ForeignCo3 has held its interest in the ordinary share capital of AusCo1 and AusCo2 for a period exceeding 24 months. Both AusCo1 and AusCo2 are Australian tax resident companies. There has been no change in the ownership of ForeignCo3, AusCo1 or AusCo2 in the previous 5 years. No previous roll-over relief has been applied in relation to the AusCo2 shares. There have been no entities held directly or indirectly by ForeignCo3 that have been removed from the company group in the last 5 years. AusCo1 does not have an interest in real property or mining rights in Australia. Proposed transaction ForeignCo2 has identified, and plans to remove, a number of unnecessary interposed entities within the global group structure to create administrative efficiencies and reduce administrative costs. As part of the proposed restructure, ForeignCo2 proposes to remove ForeignCo3, a holding company incorporated in Country B. The proposed restructure steps are as follows (hereafter referred to as the 'Proposed Transaction'): • ForeignCo3 will dispose of its shares in AusCo1 and AusCo2 to ForeignCo2 for $XX and $ZZ respectively; and • ForeignCo3 will then apply for voluntary deregistration in Country B. The cost base of the AusCo2 shares is $ZZ. Assumptions • Just before, and just after, the time of entering into the contract for disposal of the AusCo2 shares by ForeignCo3 to ForeignCo2, the sum of the market value of the assets of AusCo2 that are Taxable Australian real property (TARP) pursuant to section 855-20 of the ITAA 1997 exceeds the sum of the market value of its assets that are not TARP. • ForeignCo2 maintained X% ownership of ForeignCo3 up to the time of entering into the contract for disposal of the shares in AusCo2 to ForeignCo2. • ForeignCo3 maintained X% ownership of AusCo1 and AusCo2 up to the time of entering into the contract for disposal of the shares to ForeignCo2. • There is no material change in the assets held by AusCo1 up to the time of entering into the contract for the disposal of the shares in AusCo1 by ForeignCo3. • ForeignCo3 made a capital gain from the sale of the shares in AusCo2 to ForeignCo2. • ForeignCo3 and ForeignCo2 will choose to obtain a roll-over under subdivision 126-B for the AusCo2 shares in accordance with section 103-25 of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection104-10(2) | Income Tax Assessment Act 1997 subsection104-10(3) | Income Tax Assessment Act 1997 section 116-30 | Income Tax Assessment Act 1997 Subdivision 126-B | Income Tax Assessment Act 1997 section 126-45 | Income Tax Assessment Act 1997 section 126-50 | Income Tax Assessment Act 1997 section 126-55 | Income Tax Assessment Act 1997 section 126-60 | Income Tax Assessment Act 1997 section 855-10 | Income Tax Assessment Act 1997 section 855-15 | Income Tax Assessment Act 1997 section 855-20 | Income Tax Assessment Act 1997 section 855-25 | Income Tax Assessment Act 1997 section 960-195 | Income Tax Assessment Act 1997 subsection 975-150(1) | Income Tax Assessment Act 1997 section 975-500 | Income Tax Assessment Act 1997 section 975-505 | Income Tax Assessment Act 1997 subsection 995-1(1) | Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1936 subsection 177A(1) | Income Tax Assessment Act 1936 subsection 177C(1) | Income Tax Assessment Act 1936 subsection 177C(2A)

Reasons for decision: Summary: Do the shares in AusCo1 satisfy the definition of taxable Australian property under section 855-15? No. | Detailed Reasoning - Reasons: Subsection 108-5(1) defines a CGT asset as: (a) any kind of property; or (b) a legal or equitable right that is not property. Shares in a company are personal property (subsection 1070A(1) of the Corporations Act 2001) and thus are a CGT asset under paragraph 108-5(1)(a). Note 1 to section 108-5 lists shares in a company as examples of CGT assets. There are five categories of CGT assets that are taxable Australian property (TAP). The categories are set out in the table in section 855-15 as follows. Table 1 : CGT assets | Detailed Reasoning - Description: 1 *Taxable Australian real property (see section 855-20) 2 A *CGT asset that: (a) is an *indirect Australian real property interest (see section 855-25); and (b) is not covered by item 5 of this table 3 A *CGT asset that: (a) you have used at any time in carrying on a *business through: (i) if you are a resident in a country that has entered into an *international tax agreement with Australia containing a *permanent establishment article--a permanent establishment (within the meaning of the relevant international tax agreement) in Australia; or (ii) otherwise--a *permanent establishment in Australia; and (b) is not covered by item 1, 2 or 5 of this table 4 An option or right to *acquire a *CGT asset covered by item 1, 2 or 3 of this table 5 A *CGT asset that is covered by subsection 104-165(3) (choosing to disregard a gain or loss on ceasing to be an Australian resident). Section 855-20 provides that a CGT asset is taxable Australian real property (TARP) if it is: • real property situated in Australia (including a lease of land, if the land is situated in Australia); or • a *mining, quarrying or prospecting right (to the extent that the right is not real property), if the *minerals, *petroleum or quarry materials are situated in Australia. The key question in determining whether the shares in AusCo1 constitute taxable Australian property is whether they fall within Item 2 of the table in section 855-15, namely whether they qualify as an indirect Australian real property interest (IARPI). An IARPI is defined in section 855-25. Under subsection 855-25(1), a membership interest held by an entity in another entity at a time is an IARPI at the time if the interest passes: • the non-portfolio test; and • the principal asset test. Section 960-195 provides that the non-portfolio interest test is passed at a time if the sum of the direct participation interests held by the holding entity (ForeignCo3) and its associates in the test entity (AusCo1) is 10% or more at that time. ForeignCo3 wholly owns AusCo1 and has held its interest in the ordinary share capital of AusCo1 for a period exceeding 24 months. It is assumed this does not change up to the date of disposal of the shares in AusCo1 to ForeignCo2. As such, the non-portfolio test will be satisfied in respect of the AusCo1 shares. Section 855-30 provides that, to pass the principal asset test, the sum of the market value of the test entity's (AusCo1's) assets that are TARP must exceed the sum of the market value of its assets that are not TARP. The only assets that AusCo1 holds are not TARP. Therefore, the principal asset test will not be met and the shares in AusCo1 will not be an IARPI pursuant to section 855-15. Consequently, the shares in AusCo1 will not satisfy the definition of TAP under section 855-15, at the time of their disposal. | Detailed Reasoning - Question 2: If the answer to question 1 is 'no', will section 855-10 apply to disregard any capital gain or loss arising from the disposal of the shares in AusCo1? | Detailed Reasoning - Answer: Yes. | Detailed Reasoning - Reasons: Subsection 855-10(1) provides that a capital gain or capital loss from a CGT event can be disregarded if: • you are a foreign resident ... just before the CGT event happens; and • the CGT event happens in relation to a CGT asset that is not taxable Australian property. A 'foreign resident' is defined in subsection 995-1(1) to mean a person who is not a resident of Australia for the purposes of the ITAA 1936. Subsection 6(1) of the ITAA 1936 provides that a 'non-resident' means a person who is not a resident of Australia. ForeignCo3 who currently owns the shares in AusCo1, is a company registered in Country B and is not an Australian tax resident. Hence, it is a foreign resident. The sale of shares in AusCo1 would trigger CGT event A1. However, on the basis that the shares in AusCo1 are not taxable Australian property (as established in Question 1), subsection 855-10(1) will apply and ForeignCo3 will disregard any capital gain or loss from the sale of shares in AusCo1. | Detailed Reasoning - Question 3: Are ForeignCo3 and ForeignCo2 eligible to choose to obtain roll over relief under subdivision 126-B to disregard the capital gain arising from the sale of shares in AusCo2 to ForeignCo2? | Detailed Reasoning - Answer: Yes. | Detailed Reasoning - Subdivision 126-B rollover: There may be a roll-over if a certain CGT event (trigger event) happens involving a company (originating company) and another company (recipient company), and the circumstances set out in section 126-50 are met (subsection 126-45(1)). The eligible trigger events are listed in subsection 126-45(2) and CGT event A1 is listed as a relevant trigger event. CGT event A1 happens if an entity disposes of a CGT asset (subsection 104-10(1)). An entity disposes of a CGT asset if a change of ownership occurs from the entity to another entity, whether because of some act or event or by operation of law (subsection 104-10(2)). When ForeignCo3 (the originating company) enters into the contract with ForeignCo2 (the recipient company), to transfer all of its shares in AusCo2, CGT event A1 (the trigger event) will happen (subsection 104-10(3)). Therefore, subject to satisfying the requirements in section 126-50, a roll-over may be available. | Detailed Reasoning - Wholly-owned group: Subsection 126-50(1) requires that the originating company (ForeignCo3) and the recipient company (ForeignCo2) must be members of the same wholly-owned group at the time of the trigger event. Wholly-owned group is defined by subsection 995-1(1) as having the meaning given by section 975-500, which provides: Two companies are members of the same wholly-owned group if: (a) one of the companies is a 100% subsidiary of the other company; or (b) each of the companies is a 100% subsidiary of the same third company. Section 975-505 defines 100% subsidiary as follows: (1) A company (the subsidiary company) is a 100% subsidiary of another company (the holding company) if all the shares in the subsidiary company are beneficially owned by: (a) the holding company; or (b) one or more 100% subsidiaries of the holding company; or (c) the holding company and one or more 100% subsidiaries of the holding company. (2) However, the subsidiary is not a 100% subsidiary of the holding company if a person is in a position to affect rights, in relation to the subsidiary company, of: (a) the holding company; or (b) a 100% subsidiary of the holding company. (3) The subsidiary company is also not a 100% subsidiary of the holding company if at some future time a person will be in a position to affect rights as described in subsection (2). Subsection 975-150(1) provides that a person is in a position to affect rights of a company in relation to another company if the person has a right, power or option: (a) to acquire those rights from one or other of those companies; or (b) to do something that would prevent one or other of those companies from exercising its rights for its own benefit, or from receiving any benefit arising from having those rights. At the time of CGT event A1, ForeignCo2 (a company registered in Country B) owns 100% of the shares in ForeignCo3 (a company registered in Country B). No person is or will be in a position to affect the rights of ForeignCo2 in relation to ForeignCo3. Therefore, ForeignCo3 is a 100% subsidiary of ForeignCo2 and as such, ForeignCo3 and ForeignCo2 are members of the same wholly-owned group. | Detailed Reasoning - Not trading stock or a registered emissions unit: Subsection 126-50(2) prohibits the roll-over asset from being trading stock of, or a registered emissions unit held by, the recipient company just after the time of the trigger event. A registered emissions unit is a Kyoto unit or an Australian carbon credit unit (section 420-10). The roll-over assets are the shares in AusCo2, which are not a Kyoto unit or an Australian carbon credit unit. ForeignCo2 is not in the business of trading shares. Therefore, the AusCo2 shares will not be trading stock in the hands of ForeignCo2 just after the transfer. | Detailed Reasoning - Right, convertible interest or option: The conditions in subsections 126-50(3) and 126-50(3A) apply where the roll-over asset is a right or convertible interest referred to in Division 130 or an option of the kind referred to in Division 134. As the AusCo2 shares are not such assets, these subsections are not applicable. | Detailed Reasoning - Recipient not an exempt entity: Subsection 126-50(4) provides that the ordinary income and statutory income of the recipient company must not be exempt from income tax because it is an exempt entity for the income year of the trigger event. Subsection 995-1(1) defines exempt entity as: (a) an entity all of whose ordinary income and statutory income is exempt from income tax because of this Act or because of another Commonwealth law, no matter what kind of ordinary income or statutory income the entity might have; or (b) an untaxable Commonwealth entity. Note: See section 11-5 for a list of entities of the kind referred to in paragraph (a). ForeignCo2 is not an entity listed in section 11-5 nor an untaxable Commonwealth entity (as defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999) . Therefore, ForeignCo2 is not an exempt entity for the purposes of subsection 126-50(4). | Detailed Reasoning - Taxation Australian property: Subsection 126-50(5) provides that where both the originating company and the recipient company are foreign residents, the relevant CGT asset must be taxable Australian property just before and just after the trigger event. As discussed in Question1, the term 'taxable Australian property' is defined in section 855-15 to include a CGT asset that is an IARPI and an IARPI is defined in section 855-25. Broadly, shares in AusCo2 would be an IARPI at a point in time when the following two tests are satisfied: • the non-portfolio interest test, and • the principal asset test. Therefore, the AusCo2 shares held by ForeignCo3 just before CGT event A1 happens and held by ForeignCo2 just after CGT event A1 happens must pass the non-portfolio interest test and the principal asset test at each of those times. Section 960-195 provides that the non-portfolio interest test is passed at a time if the sum of the direct participation interests held by the holding entity in the test entity is 10% or more at that time. Just before CGT event A1 happens, ForeignCo3 will hold 100% of the shares in AusCo2, and just after CGT event A1 happens, ForeignCo2 will hold 100% of the shares in AusCo2. Therefore, the AusCo2 shares will pass the non-portfolio interest test just before and just after the trigger event. Section 855-30 provides that, to pass the principal asset test, the sum of the market value of the test entity's (AusCo2's) assets that are TARP must exceed the sum of the market value of its assets that are not TARP. It is assumed that just before and just after CGT event A1 happens to the AusCo2 shares, the sum of the market value of the assets of AusCo2 that are TARP exceeds the sum of the market value of its assets that are not TARP. Therefore, the AusCo2 shares held by ForeignCo3 just before CGT event A1 happens and held by ForeignCo2 just after CGT event A1 happens will satisfy the principal asset test. Consequently, the AusCo2 shares will be CGT assets that are indirect Australian real property interests just before and just after CGT event A1 happens and as such, will be taxable Australian property just before and just after the trigger event for the purposes of subsection 126-50(5). | Detailed Reasoning - Remaining provisions in subsections 126-50(6)-(9): The remaining provisions in subsections 126-50(6) to 126-50(9) are not applicable because: • ForeignCo3 and ForeignCo2 are both foreign (not Australian) residents at the time CGT event A1 happens; and • No previous roll-over relief has been applied in relation to the AusCo2 shares. | Detailed Reasoning - Section 126-55 requirements: Paragraph 126-55(1)(a) provides there is a roll-over if: • the originating company makes a capital gain under the trigger event or no capital loss and is not entitled to a deduction (subparagraph 126-55(1)(a)(i)), or • the originating company acquired the roll-over asset before 20 September 1985 (subparagraph 126-55(1)(a)(ii)). As AusCo2 was incorporated in 20YY, ForeignCo3 acquired the AusCo2 shares after 20 September 1985 and subparagraph 126-55(1)(a)(ii) does not apply. The cost base of the AusCo2 shares at the time of entering into the contract for sale of the shares was $ZZ. As the transaction was not arm's length, the capital proceeds for the disposal of the AusCo2 shares is the market value of the AusCo2 shares at the time of entering into the contract for sale of the shares (subsection 116-30(2)). It is assumed that ForeignCo3 makes a capital gain from the sale of the shares in AusCo2 to ForeignCo2. Hence, as the disposal of the AusCo2 shares by ForeignCo3 would give rise to a capital gain, subparagraph 126-55(1)(a)(i) is satisfied. Paragraph 126-55(1)(b) requires that the originating company and the recipient company both choose to obtain roll-over. It is assumed that both ForeignCo3 and ForeignCo2 will choose to obtain roll-over in accordance with section 103-25. | Detailed Reasoning - Conclusion: In conclusion, ForeignCo2 and ForeignCo3 will be eligible for CGT roll-over relief under Subdivision 126-B in relation to the disposal of the AusCo2 shares to ForeignCo2. | Detailed Reasoning - Question 4: If the answer to question 3 is 'yes', will any capital gain derived by ForeignCo3 on the disposal of the shares in AusCo2 to ForeignCo2 be disregarded under subsection 126-60(1)? | Detailed Reasoning - Answer: Yes. | Detailed Reasoning - Reasons: There will be a rollover in respect of the shares in AusCo2 (subsection 126-55(1)) given that: a. it has been concluded that ForeignCo3 and ForeignCo2 will be eligible to choose rollover relief; b. it is assumed that they will make that choice in accordance with section 103-25, and c. paragraph 126-55(1)(a) will also be satisfied. Section 126-60 lists the consequences of a CGT roll-over under Subdivision 126-B for both the originating and recipient company. Accordingly, when ForeignCo3 disposes of the AusCo2 shares to ForeignCo2 any capital gain made by ForeignCo3 will be disregarded (subsection 126-60(1)). | Detailed Reasoning - Question 5: If the answer to question 3 is 'yes', will ForeignCo2 inherit the first element of the cost base of the shares in AusCo2 pursuant to subsection 126-60(2) of the ITAA 1997? | Detailed Reasoning - Answer: Yes. | Detailed Reasoning - Reasons: As discussed in Question 4, there will be a roll-over in respect of the shares in AusCo2 (subsection 126-55(1)). Section 126-60 lists the consequences of a CGT roll-over under Subdivision 126-B for both the originating and recipient company. Paragraph 126-60(2)(a) provides that for a disposal case, if the originating company acquired the roll-over asset on or after 20 September 1985 then the first element of the asset's cost base (in the hands of the recipient company) is the asset's cost base (in the hands of the originating company) when the recipient company acquired it. As AusCo2 was incorporated in 20YY, the shares were acquired by ForeignCo3 after 20 September 1985. Therefore, ForeignCo2 will inherit the cost base of the shares in AusCo2 from ForeignCo3 pursuant to subsection 126-60(2). | Detailed Reasoning - Question 6: If the answer to question 3 is 'yes', will a choice by ForeignCo3 to obtain roll - over relief pursuant to paragraph 126 - 55(1)(b) to disregard the capital gain arising from the sale of shares in AusCo2 to ForeignCo2 give rise to a tax benefit under subsection 177C(1) of the ITAA 1936? | Detailed Reasoning - Answer: No. | Detailed Reasoning - Reasons: All legislative references outlined in the reasons for decision for question 6 are to the ITAA 1936 unless stated otherwise. Part IVA is the general anti-avoidance regime that gives the Commissioner the power to cancel a 'tax benefit' that has been obtained, or would be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. Relevantly, paragraph 177C(1)(a) provides that a tax benefit in connection with a scheme includes: an amount not being included in the assessable income of the taxpayer of a year of income where that amount would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out. Subsection 177A(1) provides: In this Part, unless the contrary intention appears: "scheme" means: (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action, course of action or course of conduct. However, paragraph 177C(2A)(a) provides that: A reference in this Part to the obtaining by a taxpayer of a tax benefit in connection with a scheme is to be read as not including a reference to: (a) the assessable income of the taxpayer of a year of income not including an amount that would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out where: (i) the non-inclusion of the amount in the assessable income of the taxpayer is attributable to the making of a choice under Subdivision 126-B of the Income Tax Assessment Act 1997 or an agreement under Subdivision 170-B of that Act; and (ii) the scheme consisted solely of the making of the agreement or election; Therefore, for the scheme consisting solely of the choice to obtain the roll-over pursuant to paragraph 126-55(1)(b), any tax benefit due to the non-inclusion of assessable income attributable to the making of that roll-over choice, will not be a tax benefit under subsection 177C(1).

All legislative references outlined in these reasons for decision are to the ITAA 1997 unless stated otherwise.