Private ruling: Capital gains tax
Date of advice: 13 October 2025
Published: 1 December 2025
Ruling period: 1 July 20XX to 30 June 20XX

Ruling: Q1: Will the shareholders of ABC Co (ABC) be eligible to choose CGT roll-over relief under Division 615 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the exchange of their shares in ABC for shares in ABC Holdings Co (Holdings)? | A1: Yes.

Relevant facts and circumstances: ABC ABC is an Australian incorporated company that conducts a business. ABC has X ordinary shares on issue that are owned by the following individuals (Shareholders) in the following proportions: • A - X ordinary shares (X%); • B - X ordinary shares (X%); and • C - X ordinary shares (X%). Each ordinary share in ABC has the same rights in respect to voting power, dividends and capital distributions. A and B are the directors of ABC (Directors). ABC is not a member of a tax consolidated group. Holdings Holdings was incorporated on XX XX 20XX with share capital as follows: • A - 1 Redeemable X Class Share; • B - 1 Redeemable X Class Share; and • C - 1 Redeemable X Class Share. Holdings has been dormant since incorporation and has not traded or been used for any other purpose. Holdings has no assets or liabilities. A and B are the directors of Holdings. Share Sale Agreement The Shareholders (as sellers) and Holdings (as buyer) plan to execute the Share Sale Agreement (SSA) for the sale of their ordinary shares in ABC to Holdings. Under clause X of the SSA, the Shareholders agree to sell their shareholding in ABC (listed in item X of the Schedule to the SSA) to Holdings on the Completion Date which is defined in clause X of the SSA as the date the last party signs the SSA. Under clause X of the SSA and item X of the Schedule to the SSA, the consideration for the sale of the Shareholders' shares in ABC will be the issue of X ordinary shares in Holdings to the Shareholders in the following proportions: • A - X ordinary shares (X%); • B - X ordinary shares (X%); and • C - X ordinary shares (X%). Under clause X of the SSA, Holdings will make the choice under subsection 615-30(1) of the ITAA 1997 that section 615-65 of the ITAA 1997 applies. Proposed Restructure The Shareholders intend to implement the SSA as part of a corporate restructure (Proposed Restructure) of the ABC business. The business has been successful after many years of trade and has built up its retained earnings. The Directors are concerned that these retained earnings could be at risk given the inherent risk associated with the nature of the business conducted by ABC. The Proposed Restructure is therefore motivated by a desire for greater asset protection. The Directors and their advisor have not considered other alternatives to the Proposed Restructure, nor are they aware of any other viable alternatives. It is the preference of the Directors to have these retained profits available within the ABC corporate structure to fund future investment. The Proposed Restructure will include the following steps: • Step 1: On the Completion Date, the SSA will be executed whereupon the Shareholders will dispose of their ABC shares to Holdings. • Step 2: On the Completion Date, following the disposal of their ABC shares to Holdings, the Shareholders will be issued ordinary shares in Holdings in consideration for this disposal. On the Completion Date, Holdings will therefore acquire 100% of the issued shares in ABC and the Shareholders will own 100% of the issued shares in Holdings. Each ordinary share in Holdings will have the same rights in respect to voting power, dividends and capital distributions. • Step 3: On the Completion Date and following the issue of the ordinary shares in Holdings to the Shareholders, the Redeemable X Class Shares in Holdings will be redeemed for their face value of $X per share. • Step 4: The payment of a fully franked dividend to Holdings by ABC to transfer the retained earnings from ABC to Holdings. The Shareholders are Australian residents for tax purposes and expected to be at the time of the execution of the SSA and Proposed Restructure. Neither ABC nor Holdings is or will be an ADI (authorised deposit-taking institution) within the meaning of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1936 former section 160ZZPA | Income Tax Assessment Act 1936 former section 160ZZPB | Income Tax Assessment Act 1936 former section 160ZZPC | Income Tax Assessment Act 1936 former section 160ZZPD | Income Tax Assessment Act 1997 Division 615 | Income Tax Assessment Act 1997 section 615-5 | Income Tax Assessment Act 1997 subsection 615-5(1) | Income Tax Assessment Act 1997 paragraph 615-5(1)(a) | Income Tax Assessment Act 1997 paragraph 615-5(1)(b) | Income Tax Assessment Act 1997 paragraph 615-5(1)(c) | Income Tax Assessment Act 1997 paragraph 615-5(1)(d) | Income Tax Assessment Act 1997 Subdivision 615-B | Income Tax Assessment Act 1997 section 615-15 | Income Tax Assessment Act 1997 section 615-20 | Income Tax Assessment Act 1997 subsection 615-20(1) | Income Tax Assessment Act 1997 paragraph 615-20(1)(a) | Income Tax Assessment Act 1997 paragraph 615-20(1)(b) | Income Tax Assessment Act 1997 subsection 615-20(2) | Income Tax Assessment Act 1997 subsection 615-20(3) | Income Tax Assessment Act 1997 section 615-25 | Income Tax Assessment Act 1997 subsection 615-25(1) | Income Tax Assessment Act 1997 subsection 615-25(2) | Income Tax Assessment Act 1997 subsection 615-25(3) | Income Tax Assessment Act 1997 section 615-30 | Income Tax Assessment Act 1997 subsection 615-30(1) | Income Tax Assessment Act 1997 subsection 615-30(2) | Income Tax Assessment Act 1997 paragraph 615-30(3)(a) | Income Tax Assessment Act 1997 paragraph 615-30(3)(c) | Income Tax Assessment Act 1997 subsection 615-30(4) | Income Tax Assessment Act 1997 section 615-35 | Income Tax Assessment Act 1997 section 615-65 | Income Tax Assessment Act 1997 subsection 960-130(1) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Detailed Reasoning - Question: Will the shareholders of ABC be eligible to choose CGT roll-over relief under Division 615 in relation to the exchange of their shares in ABC for shares in Holdings? | Summary: Yes. The shareholders of ABC will be eligible to choose CGT roll-over relief under Division 615 in relation to the exchange of their shares in ABC for shares in Holdings because they meet all the relevant conditions to obtain roll-over in Division 615. | Detailed Reasoning - Detailed reasoning: Broadly, Division 615 applies to a scheme to restructure a company's or unit trust's business where members cease to own shares in the company or units in the trust, and in exchange become the owner of new shares in another company. Division 615 enables such members, known as 'exchanging members', to choose to apply CGT roll-over relief to the disposal of their shares in the company or units in the unit trust which might otherwise give rise to a capital gain or capital loss. The requirements to choose the CGT roll-over are contained in sections 615-5, 615-15, 615-20, 615-25 and 615-30. | Detailed Reasoning - Section 615-5: Subsection 615-5(1) states that an exchanging member can choose to obtain roll-over relief if: • they are a member of a company or a unit trust (the original entity) - paragraph 615-5(1)(a); • they and at least one other exchanging member own all the shares or units in the original entity - paragraph 615-5(1)(b); • under a scheme for reorganising the affairs of the original entity, the exchanging members dispose of all their shares or units in the original entity to a company (the interposed company) in exchange for shares in the interposed company and nothing else - paragraph 615-5(1)(c); and • the requirements in Subdivision 615-B are satisfied - paragraph 615-5(1)(d). For the purposes of section 615-5 and the remainder of Division 615: • each of the Shareholders is an exchanging member; • ABC is the original entity; and • Holdings is the interposed company. | Detailed Reasoning - Exchanging member is a member of a company - paragraph 615-5(1)(a): Subsection 960-130(1) sets out who is a member for various entities. Under item 1 of the table in subsection 960-130(1) a member of a company includes a member of the company or stockholder in the company. The Shareholders are members of ABC on the basis that they are shareholders in ABC. The condition in paragraph 615-5(1)(a) is therefore satisfied. Each Shareholder can choose to obtain roll-over if the remaining conditions in subsection 615-5(1) are satisfied. | Detailed Reasoning - Exchanging members own all the shares in the original entity - paragraph 615-5(1)(b): Paragraph 615-5(1)(b) requires that at least 2 exchanging members own all the shares in the original entity. Since all the issued shares in ABC are owned by 3 individual shareholders who are exchanging members, paragraph 615-5(1)(b) is satisfied. Under a scheme for reorganising affairs of the original entity, the exchanging members dispose of all their shares in the original entity to an interposed company in exchange for shares and nothing else - paragraph 615-5(1)(c) 'Scheme' is defined in subsection 995-1(1) as 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 defined in the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936). 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 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) . Paragraphs 26 and 31 of TR 97/18 state: 26 .... the expression 'scheme for the reorganisation of the affairs of a unit trust' must be interpreted in the context in which that expression appears. What is meant is the interposition of a company between the unit trust and its unitholders. 31. ...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... ( emphasis added ) The Proposed Restructure constitutes a scheme for reorganising the affairs of ABC since it involves the interposition of a company between ABC and its shareholders. | Detailed Reasoning - 'And nothing else' requirement: An additional requirement under paragraph 615-5(1)(c) is that the scheme must involve the exchanging members only receiving shares in the interposed company and nothing else, in return for disposing all their shares to the interposed company. Under the Proposed Restructure, the Shareholders will only receive shares in Holdings and nothing else, in return for the disposal of their shares in ABC. The proceeds that the Shareholders are expected to receive from the redemption of the Redeemable X Class Shares in Holdings are expected to be minimal and will not trigger a breach of the 'and nothing else' requirement. Therefore the 'nothing else' requirement is satisfied as well as all the other conditions in paragraph 615-5(1)(c). | Detailed Reasoning - The requirements in Subdivision 615-B are satisfied - paragraph 615-5(1)(d): Subdivision 615-B imposes the following requirements: • interposed company must own all the original interests - section 615-15; • requirements relating to each exchanging member's interests in the original entity - section 615-20; • requirements relating to the interposed company - section 615-25; and • interposed company must make a particular choice - section 615-30. The requirement under section 615-35 is not relevant since it is only applicable to ADI restructures and no entity involved in the Proposed Restructure is or will be an ADI. | Detailed Reasoning - Interposed company must own all the original interests - section 615-15: The interposed company must own all the shares in the original entity immediately after the 'completion time', being the time all the shareholders have had their shares in the original entity disposed of under the scheme. At step X of the Proposed Restructure, the Shareholders will dispose of their ABC shares to Holdings on the Completion Date. Therefore, Holdings will own 100% of the issued shares in ABC immediately after the completion time, satisfying the requirement of section 615-15. | Detailed Reasoning - Requirements relating to each exchanging member's interests in the original entity - section 615-20: Under subsection 615-20(1), immediately after the completion time, each exchanging member must own: • a whole number of shares in the interposed company - paragraph 615-20(1)(a); and • 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 in the original entity that were owned by the member and disposed of under the scheme - paragraph 615-20(1)(b). This is satisfied on the basis that immediately after the completion time (i.e. after step X of the Proposed Restructure): • each of the Shareholders will be issued a whole number of shares in Holdings (at step X of the Proposed Restructure); and • the percentage of the shares in Holdings that will be issued to each Shareholder will be equal to the percentage of the shares in ABC that each Shareholder owned and disposed under the Proposed Restructure. Under subsection 615-20(2), for each exchanging member the following ratios must be equal: • the ratio of the market value of each exchanging member's shares in the interposed company to the market value of the shares in the interposed company issued to all the exchanging members (worked out immediately after the completion time); and • the ratio of the market value of each exchanging member's shares in the original entity that were disposed of under the scheme to the market value of all the shares in the original entity that were disposed of under the scheme (worked out immediately before the first disposal). The requirement under subsection 615-20(2) is satisfied on the basis that: • all the shares in ABC that are owned by the Shareholders and that will be disposed of as part of the scheme have the same rights; • the ratio of the market value of each Shareholder's shares in ABC that will be disposed under the scheme to the market value of all the shares in ABC that will be disposed of under the scheme is based on the percentage shareholding of each Shareholder in ABC; • all the shares in Holdings that will be issued to the Shareholders will have the same rights; • the ratio of the market value of each Shareholder's shares in Holdings that they will be issued with to the market value of the shares in Holdings that will be issued to all the Shareholders is based on the percentage shareholding of each Shareholder in Holdings; and • the percentage shareholding of each Shareholder in Holdings will be the same as their percentage shareholding in ABC. Under subsection 615-20(3), each exchanging member seeking roll-over relief must be either: • an Australian resident at the time the shares in the original entity are disposed of under the scheme; or • a foreign resident at that time and the shares in the original entity were taxable Australian property (TAP) immediately before that time and the shares in the interposed company are TAP immediately after the completion time. Each of the Shareholders are Australian residents for tax purposes and therefore the requirement of subsection 615-20(3) is satisfied. | Detailed Reasoning - Requirements relating to the interposed company - section 615-25: Section 615-25 prescribes the following requirements relating to the interposed company: • the shares issued in the interposed company must not be redeemable shares - subsection 615-25(1); • 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 - subsection 615-25(2); and • immediately after the completion time the exchanging members must own all the shares in the interposed company, or entities other than those members must own no more than 5 shares in the interposed company, and the market value of those shares expressed as a percentage of the market value of all the shares in the interposed company must be such that it is reasonable to treat the exchanging members as owning all the shares - subsection 615-25(3). The requirements under section 615-25 are satisfied on the basis that: • the shares that will be issued in Holdings will be ordinary shares - they are not redeemable shares; • each Shareholder who is issued shares in Holdings will own the shares from the time they are issued until at least the completion time; and • the Shareholders will collectively own 100% of the shares in Holdings immediately after the completion time. | Detailed Reasoning - Interposed company must make a particular choice - section 615-30: Subsection 615-30(1) states that, unless subsection 615-30(2) applies, the interposed company must choose that section 615-65 applies. Subsection 615-30(2) applies if immediately before the completion time the consolidated group consisted of the original entity as head company and one or more members (the other group members) and immediately after the completion time, the interposed company is the head company of a consolidatable group consisting only of itself and the other group members. ABC is not a member of a tax consolidated group so subsection 615-30(2) is not applicable. Under clause 4 of the SSA, Holdings will make the choice under subsection 615-30(1) that section 615-65 applies. Under paragraph 615-30(3)(a), the choice under subsection 615-30(1) must be made within X months after the completion time. However, the Commissioner has a discretion to allow further time to make this choice under paragraph 615-30(3)(c). Under subsection 615-30(4), the way the interposed company prepares its income tax returns is sufficient evidence of the making of the choice. In summary, all the requirements in Subdivision 615-B are satisfied. | Detailed Reasoning - Conclusion: Since all the requirements in subsection 615-5(1) will be satisfied, the Shareholders will be eligible for roll-over relief under Division 615 in relation to the disposal of their shares in ABC under the Proposed Restructure.