Private ruling: CGT - Division 149 majority underlying interest - no new shareholders
Date of advice: 2 July 2025
Published: 15 September 2025
Ruling period: Year ending 30 June 2025
Date scheme commenced: 1 July 2024

Ruling: Q1: Is the Commissioner satisfied, or does the Commissioner think it reasonable to assume, that for the purposes of Division 149 of the Income Tax Assessment Act 1997 (ITAA 1997) the majority underlying interests in the goodwill of the Company have been maintained? | A1: Yes. While several share dealings in the Company have occurred after 19 September 1985, no new shareholders have been introduced. The share dealings simply change the respective percentages as between the ultimate owners with majority underlying interests immediately before 20 September 1985. The issuing of new shares to these ultimate owners, and the subsequent buy-back of shares by the Company, does not reduce the aggregated underlying interests of the ultimate owners below 100%. In addition, as Individual 2's interests in the Company were transferred to Individual 1 upon the death of Individual 2. Individual 1 is treated as holding these interests for the period Individual 2 held them. As such, the Commissioner is satisfied, or thinks it reasonable to assume, that at all times on and after 20 September 1985 majority underlying interests in the goodwill of the Company were had by ultimate owners who had majority underlying interests in those assets before that date.

Relevant facts and circumstances: The Company was incorporated before 20 September 1985. Since incorporation, the directors of the Company have been Individual 1 and Individual 2 and their two children Individual 3 and Individual 4. The Company recently sold the business, including goodwill. The Company's shares have been owned by Individual 1, Individual 2, Individual 3 and Individual 4 in various proportions. Since Individual 3 and 4 were minors, a deed of trust was established for each of them, and they were the sole beneficiary under the respective trusts. The trusts held one Ordinary Class share each, on trust until they reached 18 years of age. The trustee transferred the shares, dividends and interest payable to the individuals as beneficiaries after they reached 18 years of age. The shares issued in the Company included only Ordinary shares of different classes. Original allotment of shares on incorporation: Shareholder Percentage ownership % Individual 1 50% Individual 2 50% TOTAL 100% Additional shares allotted under trust: Shareholder Percentage ownership % Individual 1 25% Individual 2 25% The Trustee for Individual 3 25% The Trustee for Individual 4 25% TOTAL 100% Shareholding in the Company prior to 20 September 1985 after shares were transferred to Individual 3 and Individual 4 in their individual capacities: Shareholder Percentage ownership % Individual 1 25% Individual 2 25% Individual 3 25% Individual 4 25% TOTAL 100% As per the Company's Memorandum and Articles of Association, sometime later, additional shares were allotted which resulted in the following: Shareholder Percentage ownership % Individual 1 49.99% Individual 2 16.69% Individual 3 16.66% Individual 4 16.66% TOTAL 100% An industry regulator which the Company is a member of changed their minimum shareholding requirements. To comply with these requirements, the Company held a directors meeting to amend the capital and shares listed in its Memorandum and Articles of Association. A special resolution was passed to increase the authorised capital to satisfy these requirements and additional shares were created. The Company's paid-up capital was increased with the issuing of some of the additional shares. These shares were equally allotted and issued to Individual 1 and Individual 2. Following the creation and issue of the additional shares the company's shareholding comprised of: Shareholder Percentage ownership % Individual 1 49.99% Individual 2 38.89% Individual 3 5.56% Individual 4 5.56% Total 100% The industry requirements were later revoked. Following this the Company resolved to update its Memorandum and Articles of Association and adopt a constitution that incorporated the various simplification provisions adopted to date under the Corporations Law. Further, the Company resolved to remove the additional shares issued through a general meeting. The additional shares were cancelled through a share buy-back scheme. Following the share buy-back the shareholding in the Company was: Shareholder Percentage ownership % Individual 1 49.99% Individual 2 16.69% Individual 3 16.66% Individual 4 16.66% Total 100% Following the passing of Individual 2 their shares passed to Individual 1 under Individual 2's Will, resulting in the following shareholdings: Shareholder Percentage ownership % Individual 1 66.68 Individual 2 Individual 3 16.66% Individual 4 16.66% Total 100% No further shares have been issued, cancelled or transferred, and the Company's Memorandum and Articles of Association did not prevent the Company from making distributions to its members.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 149-10 | Income Tax Assessment Act 1997 subsection 149-15(1) | Income Tax Assessment Act 1997 subsection 149-15(2) | Income Tax Assessment Act 1997 paragraph 149-15(3)(a) | Income Tax Assessment Act 1997 subsection 149-15(4) | Income Tax Assessment Act 1997 subsection 149-15(5) | Income Tax Assessment Act 1997 subsection 149-30(1) | Income Tax Assessment Act 1997 subsection 149-30(2)