Private ruling: Division 615 roll-over
Date of advice: 11 February 2025
Published: 24 March 2025
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to choose to obtain a roll-over for the transfer of shares under Division 615 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. This private ruling applies for the following period: Year ended 30 June 20XX The scheme commenced on: 1 July 20XX

Relevant facts and circumstances: Company A is a company limited by shares incorporated in Australia in 20XX and is a resident of Australia for income tax purposes. All of the shares in Company A are ordinary shares and were acquired by their respective holders on or after 20 September 1985 for a total of $X. The current shareholding of Company A is as follows: Table 1: current shareholding of Company A Name of the Shareholder # of Shares (Class) % Shares Individual A X (ORD) X% Entity A X (SEED PREF) X% Entity B X (SEED PREF) X% Entity C X(SEED PREF) X% TOTAL Total number of shares 100% You are an Australian resident for tax purposes. The shares held by foreign shareholders in Company A are Taxable Australian Property. The rights of the holders of Seed Preference Shares are set out in Schedule 3 of the Shareholder Agreement. These shares have equal weighing to the Ordinary Shares. The only additional entitlement this class of shareholders has is preference on payout in an insolvency event, above the entitlement of Ordinary shareholders. Company B will be the wholly owned subsidiary of Company A. All the shares in this company will be ordinary shares held by Company A. This entity will form part of the income tax consolidated group. This entity is a resident company of Australia for income tax purposes. The director of both companies desires to restructure to make it appealing to potential investors to allow the business to grow globally and protect the intellectual property of the business. Corporate restructure Company A will announce through a resolution of the director, its intention to proceed with a re-organisation of Company A corporate structure, subject to, shareholder and regulatory approvals. The re-organisation broadly includes the following steps: • The incorporation of a new 100% owned subsidiary of Company A called Company B • The incorporation of a new holding company, Company C • The exchange by Company C existing shareholders of their Company A shares for equivalent shares in Company D on a one-for-one basis, and nothing else; • After the completion time, 100% of the shares in Company A will be transferred to Company C forming a wholly owned subsidiary. The restructure will be undertaken by way of a voluntary scheme of arrangement. Under the restructure, each participating equity participant will receive a whole number of equity instruments in Company C equal to the number of equity instruments they held in Company A, and nothing else. There will be no provision for the shares issued by Company C to the participating shareholders to be bought back and cancelled and so these are therefore not considered redeemable shares. Company A's shareholders will have the same proportionate ownership and value immediately before and after the restructure. After the share exchange, Company C will become the sole shareholder and holding company of Company A. On incorporation, Company C will have two Directors (being Individual A and an appointed local Corporate Advisor) and one shareholder, being Individual A. This company will have no assets or liabilities at the time of incorporation. The one share held by Irene will be cancelled on exchange of shares with the existing Company A shareholders. The shareholding of Company C will reflect the current shareholding of Company A with identical shareholdings, classes and rights. There is no planned transfer of assets or liabilities between the companies. There is no intention by the shareholders to realise their interests after the transaction. A draft share swap agreement has been provided. Both the ordinary and preference share will be covered by this agreement. Tax choices The registration as a consolidated group for Company A will be made and notified to the Australian Taxation Office within 28 days of making the relevant choice by execution of the relevant agreements. Pursuant to subsection 615-30(1) and (2) of the ITAA 1997 the company will chose within 28 days after implementation that a consolidated group continues.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 615 | Income Tax Assessment Act 1997 Subdivision 615-B | Income Tax Assessment Act 1997 section 615-15 | Income Tax Assessment Act 1997 subsection 615-20(2) | Income Tax Assessment Act 1997 subsection 615-25(1) | Income Tax Assessment Act 1997 subsection 615-30(1) | Income Tax Assessment Act 1997 subsection 615-30(2)

Reasons for decision: Summary: All references are to the Income Tax Assessment Act 1997 unless otherwise specified. As all of the relevant requirements have been satisfied you are entitled to choose to obtain a roll-over for the transfer of your shares to Company C under Division 615. | Detailed Reasoning - Detailed reasoning: Division 615 states that you can choose for transactions under a scheme to restructure a company's business to be tax neutral if, under the scheme you cease to own shares in the company and, in exchange, you become the owner of new shares in another company. Subsection 615-5(1) states that you can choose to obtain the roll-over if: (a) you are a member of a company (the original entity ); and (b) you and at least one other entity (the exchanging members ) own all the shares in it; and (c) under a scheme for reorganising its affairs, the exchanging members dispose of all their shares in it to a company (the interposed company ) in exchange for shares in the interposed company (and nothing else); and (d) the requirements in Subdivision 615-B are satisfied. Subsection 995-1(1) states that a 'member', in relation to an entity, has the meaning given by section 960-130. Section 960-130 states that where an entity is a company, a stockholder is a member of the company. Section 995-1 provides that 'scheme' means 'any arrangement,' or 'any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.' The phrase 'scheme for reorganising its affairs' is not described or defined in section 615-10. However, a similar phrase 'reorganisation of the affairs' (of a unit trust or a company) was used in former sections 160ZZPA, 160ZZPB, 160ZZPC and 160ZZPD of the Income Tax Assessment Act 1936 (ITAA 1936). The ATO discussed the meaning of these provisions in Taxation Ruling TR 97/18 Income tax: capital gains: roll-over relief following reorganisation of the affairs of a unit trust or company - sections 160ZZPA, 160ZZPB, 160ZZPC and 16OZZPD (TR 97/18). In the 'explanations' section, Paragraph 31 of TR 97/18 says: ... the legislation does not intend that roll-over relief of this type should be available in the case of a merger, but rather should be available for the type of reorganisation where another company is interposed between the owners of an existing entity and that entity. In this way, the owners exchange their existing direct interests in the entity for shares in the interposed company, thus retaining their existing economic ownership of the underlying assets. You are considered a member of the company. Under the proposed transaction: • immediately before the transfer the shareholders will own all the shares in Company A and will transfer all their interests to Company C. • in exchange, Company C will issue shares carrying the same rights as the shares to each shareholder and nothing else. The interposition of Company C is a scheme for reorganising the affairs of the Company. Therefore, the requirements of paragraphs 615-5(1)(a)-(c) will be satisfied. The further requirements under Subdivision 615-B are spread across sections 615-15 to 615-30. | Detailed Reasoning - Section 615-15 - interposed company must own all the original interests: Section 615-15 states: The interposed company must own all the shares in the original entity immediately after the time (the completion time) all the exchanging members have had their shares in the original entity disposed of under the scheme. Under the proposed transaction, Company C (the interposed company) will own all the shares in Company A immediately after the completion time, satisfying the requirements of section 615-15. | Detailed Reasoning - Section 615-20 - requirements relating to your interests in the original entity: Section 615-20 states: (1) Immediately after the completion time, each exchanging member must own: (a) a whole number of shares in the interposed company; and (b) a percentage of the shares in the interposed company that were issued to all the exchanging members that is equal to the percentage of the shares or units in the original entity that were: (i) owned by the member; and (ii) disposed of, redeemed or cancelled under the scheme. (2) The following ratios must be equal: (a) the ratio of: (i) the market value of each exchanging member's shares in the interposed company; to (ii) the market value of the shares in the interposed company issued to all the exchanging members (worked out immediately after the completion time); (b) the ratio of: (i) the market value of that member 's shares or units in the original entity that were disposed of, redeemed or cancelled under the scheme; to (ii) the market value of all the shares or units in the original entity that were disposed of, redeemed or cancelled under the scheme (worked out immediately before the first disposal, redemption or cancellation). (3) Either: (a) you are an Australian resident at the time your shares or units in the original entity are disposed of, redeemed or cancelled under the scheme; or (b) if you are a foreign resident at that time: (i) your shares or units in the original entity were taxable Australian property immediately before that time; and (ii) your shares in the interposed company are taxable Australian property immediately after the completion time. Under the proposed transaction: • the shareholders will transfer their shares in Company A to Company C. • in exchange, Company C will issue shares to each shareholder so that after the issue of shares, each shareholder has shares of a whole number and in the same percentage as the shares that were owned by the shareholders of each respective class, and nothing else. • at (and immediately after) completion, the shareholders will own all of the shares in Company C. • the new shares will have the same rights as the original shares The requirements of subsection 615-20(1) will be satisfied, as immediately after the completion time: • each of the shareholders (exchanging members) of Company C will own a whole number of shares. • the shareholders of Company C will hold a percentage of the respective class of shares in Hold Co (interposed entity) that is equal to the percentage of the respective class of shares they held in Company A (original entity) immediately before they transferred the units to Company C under the proposed restructure. The percentage and rights of shares held by the shareholders immediately after the completion time equals the percentage and rights of the shares immediately before the transfer under the proposed transaction. The shareholders will own all the shares in Company C. It follows that the proportionate market value of the interest of each shareholder in Company C immediately after the completion time will be the same as the proportionate market value of the prior interest that was held by the former shareholders in the Company A immediately before the disposal to Company C. As continuity of market value will be preserved, the requirements in subsection 615-20(2) will be satisfied. You will at all relevant times be Australian tax resident. Any foreign resident shareholders shares will be taxable Australian property at the relevant time. The requirements in subsection 615-20(3) will thus be satisfied. | Detailed Reasoning - Section 615-25 - requirements relating to the interposed company:: Section 615-25 states: (1) The shares issued in the interposed company must not be redeemable shares. (2) Each exchanging member who is issued shares in the interposed company must own the shares from the time they are issued until at least the completion time. (3) Immediately after the completion time the exchanging members must own all the shares in the interposed company... Under the proposed transaction: • the shares issued by Company C to the shareholders are not redeemable shares. • the shareholders of Company C (exchanging members) will own all the shares from the time they are issued until at least the completion time. Therefore, the requirements in section 615-25 will be satisfied. | Detailed Reasoning - Section 615-30 - interposed company must make a particular choice: Under section 615-30, the interposed company must choose that section 615-65 applies within 2 months after the completion time (where the original entity is not a head of a consolidated group immediately before the completion time). All the requirements of Subdivision 615-B and subsection 615-5(1) will be satisfied. Therefore, you are entitled to choose to obtain a roll-over for the transfer of your shares to Company C under Division 615.

Does 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 and enter 'part iva general' in the search box on the top right of the page, then select 'Part IVA: the general anti-avoidancerule for income tax'.