Class Ruling CR 2021/81

What this ruling is about: 1. This Ruling sets out the income tax consequences of the demerger of Minerals 260 Limited (Minerals 260) by Liontown Resources Limited (LTR) which was implemented on 4 October 2021 (Implementation Date). 2. Full details of this scheme are set out in paragraphs 30 to 57 of this Ruling. 3. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. Who this Ruling applies to 4. This Ruling applies to you if you held ordinary shares in LTR and you: 5. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 30 to 57 of this Ruling. Note: Division 230 will not apply to individuals, unless they have made an election for it to apply. When this Ruling applies 6. This Ruling applies from 1 July 2021 to 30 June 2022. Demerger happened 7. A demerger, as defined in section 125-70, happened to the LTR demerger group (which included LTR and Minerals 260) under the scheme described in paragraphs 30 to 57 of this Ruling. Capital gains tax consequences CGT event G1 8. CGT event G1 happened when you were paid an amount by LTR in respect of your LTR shares by way of the transfer to you of Minerals 260 shares on the Implementation Date (section 104-135). 9. You will make a capital gain from CGT event G1 happening if the amount of the reduction of share capital for each LTR share (0.21 cents) was more than the cost base of your LTR share. If so, the capital gain is equal to the amount of the excess (subsection 104-135(3)). 10. No capital loss can be made from CGT event G1 (Note to subsection 104-135(3)). Australian-resident shareholders Choosing demerger roll-over 11. If you are an Australian resident, you can choose to obtain demerger roll-over for your LTR shares (subsection 125-55(1)). 12. If you choose demerger roll-over for your LTR shares: Not choosing demerger roll-over 13. If you do not choose demerger roll-over for your LTR shares, you: Cost base / reduced cost base of your Liontown Resources Limited and Minerals 260 Limited shares 14. The first element of the Cost base / reduced cost base of each LTR share and corresponding Minerals 260 share is worked out by: 15. The apportionment is done on a reasonable basis having regard to the market values (just after the demerger) of the LTR shares and Minerals 260 shares, or an anticipated reasonable approximation of those market values (subsections 125-80(2) and (3)). 16. The Commissioner accepts that a reasonable apportionment is to attribute:

Class of entities or scheme: 30. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. | Liontown Resources Limited: 31. LTR is a company that was incorporated in Australia on 2 February 2006 and whose shares were listed on the Australian Securities Exchange (ASX) on 27 December 2006. 32. LTR is primarily an explorer and developer of battery materials at its Kathleen Valley Lithium-Tantalum Project in Western Australia. 33. Immediately before the Implementation Date, LTR had on issue: 34. There were no other ownership interests (as defined in subsection 125-60(1)) in LTR. 35. Immediately before the Implementation Date, LTR had $136,388,981 credited to its share capital account. 36. Immediately before the Implementation Date, LTR shareholders were mainly Australian residents and less than 10% of LTR shares were held by foreign residents. 37. LTR has not paid any dividends to its shareholders since its listing on the ASX. | Minerals 260 Limited: 38. Minerals 260 is a company incorporated in Australia. 39. Minerals 260 has mining interests in Western Australia (including the Moora and Koojan Joint Venture assets, consisting of gold-nickel-copper projects) held by its wholly-owned subsidiary ERL (Aust) Pty Ltd. 40. Immediately before the demerger, Minerals 260 had 160 million ordinary shares on issue, which were all owned by LTR. | The demerger of Minerals 260 Limited: 41. The demerger of Minerals 260 was undertaken by a reduction of share capital under section 256B of the Corporations Act 2001. 42. The shareholders of LTR voted at a meeting on 22 September 2021 to approve an ordinary resolution under section 256C of the Corporations Act 2001 to reduce the share capital of LTR by an amount (the capital reduction amount) equal to the market value of the shares in Minerals 260 that will be transferred to the shareholders of LTR less a demerger dividend. The capital reduction amount equated to 0.21 cents per LTR share. 43. The date for determining the entitlement of LTR shareholders to receive Minerals 260 shares was the Record Date (28 September 2021). 44. On the Implementation Date (4 October 2021), shares in Minerals 260 were transferred by LTR to LTR shareholders. Each LTR shareholder received one Minerals 260 share for every 11.94486 LTR shares they held on the Record Date, and nothing else. 45. After the demerger, LTR will not own any shares in Minerals 260. 46. Shares in Minerals 260 were listed for quotation on the ASX on 11 October 2021. | Accounting treatment: 47. LTR accounted for the demerger by debiting its: 48. The demerger dividend was calculated as the difference between the market value of the Minerals 260 shares distributed and the capital reduction amount. | Sale Facility: 49. Ineligible Foreign Shareholders had the LTR shares to which they were entitled sold by LTR through a nominee on the ASX (Sale Facility) who remitted the net sale proceeds to the relevant shareholders. The shares of the ineligible foreign shareholders were transferred to the nominee on the Implementation Date. 50. Ineligible Foreign Shareholders were shareholders who were not Eligible Shareholders on the Record Date. Eligible Shareholders were shareholders recorded in LTR's register of members as at the Record Date as having a registered address in Australia or New Zealand. | Reasons for demerger: 51. The directors of LTR formed the view that the demerger would allow: | Other matters: 52. There are no LTR shares held by a foreign-resident LTR shareholder that passed the non-portfolio interest test (within the meaning of section 960-195) throughout a 12-month period in the 24 months immediately before and ending on the Implementation Date. 53. Immediately before the Implementation Date, LTR's share capital account was not tainted (within the meaning of Division 197). 54. The performance rights and unlisted options in LTR are either employee share scheme interests that satisfy the conditions in subsection 125-75(2) or they are adjusting instruments as defined in subsection 125-75(5). 55. LTR did not elect under subsection 44(2) of the ITAA 1936 that subsections 44(3) and (4) of the ITAA 1936 will not apply to the demerger dividend for all LTR shareholders. 56. Just after the demerger, CGT assets owned by Minerals 260 and its demerger subsidiaries representing at least 50% by market value of all the CGT assets owned by those entities were used in carrying on a business by those entities (subsection 44(5) of the ITAA 1936). 57. For the purposes of the Cost base / reduced cost base apportionment under subsections 125-80(2) and (3), a reasonable approximation of the market values of an LTR share and a Minerals 260 share just after the demerger has been calculated as: Commissioner of Taxation 24 November 2021 © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Not previously issued as a draft

Ruling: 1. This Ruling sets out the income tax consequences of the demerger of Minerals 260 Limited (Minerals 260) by Liontown Resources Limited (LTR) which was implemented on 4 October 2021 (Implementation Date). 2. Full details of this scheme are set out in paragraphs 30 to 57 of this Ruling. 3. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. | Who this Ruling applies to: 4. This Ruling applies to you if you held ordinary shares in LTR and you: 5. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 30 to 57 of this Ruling. Note: Division 230 will not apply to individuals, unless they have made an election for it to apply. | When this Ruling applies: 6. This Ruling applies from 1 July 2021 to 30 June 2022. | Demerger happened: 7. A demerger, as defined in section 125-70, happened to the LTR demerger group (which included LTR and Minerals 260) under the scheme described in paragraphs 30 to 57 of this Ruling. | CGT event G1: 8. CGT event G1 happened when you were paid an amount by LTR in respect of your LTR shares by way of the transfer to you of Minerals 260 shares on the Implementation Date (section 104-135). 9. You will make a capital gain from CGT event G1 happening if the amount of the reduction of share capital for each LTR share (0.21 cents) was more than the cost base of your LTR share. If so, the capital gain is equal to the amount of the excess (subsection 104-135(3)). 10. No capital loss can be made from CGT event G1 (Note to subsection 104-135(3)). | Choosing demerger roll-over: 11. If you are an Australian resident, you can choose to obtain demerger roll-over for your LTR shares (subsection 125-55(1)). 12. If you choose demerger roll-over for your LTR shares: | Not choosing demerger roll-over: 13. If you do not choose demerger roll-over for your LTR shares, you: | Cost base / reduced cost base of your Liontown Resources Limited and Minerals 260 Limited shares: 14. The first element of the Cost base / reduced cost base of each LTR share and corresponding Minerals 260 share is worked out by: 15. The apportionment is done on a reasonable basis having regard to the market values (just after the demerger) of the LTR shares and Minerals 260 shares, or an anticipated reasonable approximation of those market values (subsections 125-80(2) and (3)). 16. The Commissioner accepts that a reasonable apportionment is to attribute:




What this Ruling is about | If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. | Example - cost base apportionment of Liontown Resources Limited and Minerals 260 Limited shares: 17. David held 5,000 LTR shares that had a total cost base of $5,000 just before the demerger. He received 418 Minerals 260 shares under the demerger (one Minerals 260 share for every 11.94486 LTR shares). | 18. David works out the first element of the cost bases of his LTR shares and Minerals 260 shares just after the demerger as follows: | Acquisition date of the Minerals 260 Limited shares for discount capital gain purposes: 19. For the purpose of determining whether you can make a discount capital gain from a future CGT event that happens to a Minerals 260 share you acquired under the demerger, you will be taken to have acquired the Minerals 260 share on the date you acquired, for CGT purposes, the corresponding LTR share (table item 2 of subsection 115-30(1). This will be the case whether or not you choose demerger roll-over. | Foreign-resident shareholders: 20. If you are a foreign resident (that is, you are not a resident of Australia, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)), any capital gain you make from CGT event G1 in relation to your LTR shares is disregarded unless your LTR shares were taxable Australian property (section 855-10). Your LTR shares were taxable Australian property if they were: | Limited availability of demerger roll-over: 21. If you are a foreign resident, you can choose to obtain demerger roll-over for your LTR shares if the Minerals 260 shares you acquired under the demerger were also taxable Australian property just after you acquired them (subsections 125-55(1) and (2)). | 22. Whether or not you choose demerger roll-over, or demerger roll-over is available to you, you must work out the first element of the Cost base / reduced cost base of each LTR share and corresponding Minerals 260 share in the same way as described in paragraphs 14 to 16 of this Ruling (subsections 125-80(2) and (3), and 125-85(1) and (2)). | Acquisition date of the Minerals 260 Limited shares for discount capital gain purposes: 23. For the purpose of determining whether you can make a discount capital gain from a future CGT event that happens to a Minerals 260 share you acquired under the demerger, you will be taken to have acquired the Minerals 260 share on the date you acquired, for CGT purposes, the corresponding LTR share (table item 2 of subsection 115-30(1)). This will be the case whether or not you choose demerger roll-over. | Sale of Minerals 260 Limited shares under the Sale Facility: 24. If you are an Ineligible Foreign Shareholder whose Minerals 260 shares were sold through the Sale Facility, CGT event A1 happened to you on the Implementation Date in relation to the Minerals 260 shares that were transferred to the Sale Facility nominee (section 104-10). | 25. The capital proceeds from the disposal of each Minerals 260 share were the net sale proceeds for the share received by you from the Sale Facility nominee. | Not an assessable dividend: 26. No part of the value of a Minerals 260 shares transferred to you under the demerger will be included in your assessable income under subsection 44(1) of the ITAA 1936. Although any part of the value of a Minerals 260 share that exceeds the amount debited to the share capital account of LTR is a 'dividend' under subsection 6(1) of the ITAA 1936, it will be a 'demerger dividend' under subsections 44(3) to (5) of the ITAA 1936. A demerger dividend is non-assessable non-exempt income for you. | No dividend withholding tax for non-resident Liontown Resources Limited shareholders: 27. If you are not a resident of Australia (as defined in subsection 6(1) of the ITAA 1936), no part of the value of a Minerals 260 share transferred to you under the demerger will be subject to dividend withholding tax (subsection 128B(3D) of the ITAA 1936). | Anti-avoidance provisions will not apply to deem an assessable dividend: 28. The Commissioner will not make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the whole, or any part, of the distribution of share capital. This is because all shareholders of LTR participated in the distribution of share capital based on the number of LTR shares they held on the Record Date, so that there was no streaming of capital benefits. | 29. As the purpose condition in paragraph 45B(2)(c) of the ITAA 1936 is not satisfied, the Commissioner will not make a determination under either:


Legislative references: ITAA 1936 6(1) ITAA 1936 44(1) ITAA 1936 44(2) ITAA 1936 44(3) ITAA 1936 44(4) ITAA 1936 44(5) ITAA 1936 45A(2) ITAA 1936 45B(2)(c) ITAA 1936 45B(3)(a) ITAA 1936 45B(3)(b) ITAA 1936 45BA ITAA 1936 45C ITAA 1936 128B(3D) ITAA 1997 104-10 ITAA 1997 104-135 ITAA 1997 104-135(3) ITAA 1997 104-165(3) ITAA 1997 115-30(1) ITAA 1997 125-55(1) ITAA 1997 125-55(2) ITAA 1997 125-60(1) ITAA 1997 125-70 ITAA 1997 125-75(2) ITAA 1997 125-75(5) ITAA 1997 125-80(1) ITAA 1997 125-80(2) ITAA 1997 125-80(3) ITAA 1997 125-85(1) ITAA 1997 125-85(2) ITAA 1997 Div 197 ITAA 1997 Div 230 ITAA 1997 855-10 ITAA 1997 855-15 ITAA 1997 960-195 ITAA 1997 977-50 ITAA 1997 995-1(1) TAA 1953 Corporations Act 2001 256B Corporations Act 2001 256C