Class Ruling CR 2016/45
Date of effect: 1 July 2015

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. Relevant provisions 2. The relevant provisions dealt with in this Ruling are: All legislative references in this Ruling are to the ITAA 1997 unless otherwise indicated. Class of entities 3. The class of entities to which this Ruling applies are the holders of units in The Airlie Share Fund (ASF) who: Qualifications 4. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 8 to 17 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then:

Class of entities or scheme: 3. The class of entities to which this Ruling applies are the holders of units in The Airlie Share Fund (ASF) who: | Qualifications: 4. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 8 to 17 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This Ruling applies from 1 July 2015 to 30 June 2016. The Ruling continues to apply after 30 June 2016 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10 Public Rulings). 8. The following description of the scheme is based on information provided by the applicant. ( Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation) | ASF and ACSF: 9. ASF and The Airlie Concentrated Share Fund (ACSF) are unit trusts which were established in 2012, as unregistered managed investment schemes. Units in ASF and ACSF are held only by wholesale clients as defined by the Corporations Act 2001. The investment objective of each of ASF and ACSF is to outperform the S&P/ASX 300 Accumulation Index over rolling three-year periods, by actively investing in Australian listed securities, futures and options, and cash. ASF and ACSF are not listed on the Australian Securities Exchange (ASX). 10. The trustee for each of ASF and ACSF is proposing to undertake a corporate restructure, with the object of combining ownership of all of the assets of ASF and ACSF, given that each of ASF and ACSF has substantially the same investment strategy and objective. | The Scheme: 11. On the Implementation Date (10 June 2016), the ASF unitholders will receive ACSF units in exchange for the cancellation of each unit they hold in ASF. The number of ACSF units that the ASF unitholders will receive will depend on the net asset value of each ASF unit and each ACSF unit on the Implementation Date. 12. The ASF unitholders will not receive an amount of money for the exchange. | Other matters: 13. All of the ASF unitholders will be offered the opportunity to participate in the Scheme and the offer will be available to all unitholders that are ASF unitholders on the Record Date (12 May 2016) on the same terms. 14. Both ASF and ACSF were settled after 20 September 1985. 15. At the time of the Scheme there was only one class of units on issue in ASF. 16. ASF unitholders and the Trustee of ACSF dealt with each other at arm's length (for the purposes of subsection 124-781(4)). 17. ASF and ACSF did not have a 'significant stakeholder' or a 'common stakeholder' in relation to the scheme within the meaning of those expressions in section 124-783. | CGT event C2: 18. CGT event C2 happened when the ASF units held by ASF unitholders came to an end by their cancellation (section 104-25). 19. The time of CGT event C2 is on the Implementation Date (subsection 104-25(2)). 20. A unitholder made a capital gain from CGT event C2 happening if the capital proceeds from the cancellation of a unit exceeded the cost base of that unit (subsection 104-25(3)). 21. A unitholder made a capital loss from CGT event C2 happening if the capital proceeds from the cancellation of a unit were less than its reduced cost base (subsection 104-25(3)). 22. The capital proceeds from CGT event C2 happening to a unit in ASF is the market value of the number of ACSF units received in respect of the cancellation of that unit (subsection 116-20(1)). The market value of an ACSF unit is worked out as at the time of CGT event C2, which is on the Implementation Date. | Availability of scrip for scrip roll-over if a capital gain is made: 23. Subject to the qualification in the following paragraph, a unitholder who made a capital gain from the cancellation of their ASF unit in exchange for ACSF units may choose to obtain scrip for scrip roll-over (sections 124-781 and 124-785). 24. Scrip for scrip roll-over cannot be chosen if any capital gain a unitholder might make from their replacement ACSF units would be disregarded, except because of a roll-over (paragraph 124-795(2)(a)). | Consequences if scrip for scrip roll-over is chosen: 25. If scrip for scrip roll-over is chosen, the capital gain referable to the receipt of ACSF units is disregarded (subsection 124-785(1)). | Consequences if scrip for scrip roll-over is not chosen, or cannot be chosen: 26. An ASF unitholder who does not choose roll-over, or cannot choose roll-over, must take into account any capital gain or capital loss from CGT event C2 happening on the cancellation of their ASF units in working out their net capital gain or net capital loss for the income year in which CGT event C2 happens (sections 102-5 and 102-10). 27. A unitholder who makes a capital gain where roll-over is not chosen, or cannot be chosen, can treat the capital gain as a 'discount capital gain' provided that the conditions of Subdivision 115-A are met. In particular, the ASF units that were cancelled must have been acquired by the unitholder at least 12 months before the Implementation Date. | Cost base and reduced cost base of ACSF units received: 28. The method for calculating the cost base and reduced cost base of the ACSF units acquired by a unitholder in exchange for their ASF units depends on whether scrip for scrip roll-over is chosen. | Scrip for scrip roll-over is chosen: 29. If an ASF unitholder chooses scrip for scrip roll-over, the acquisition date of the new ACSF units for the purposes of making a discount capital gain is the date when they acquired the ASF units that were cancelled to acquire ACSF units (item 2 of the table in subsection 115-30(1)). 30. Where scrip for scrip roll-over is chosen, the first element of the cost base and reduced cost base of a replacement ACSF unit received is worked out by reasonably attributing to it the cost base and reduced cost base (respectively) of the ASF unit for which it was exchanged and for which the roll-over was obtained (subsections 124-785(2) and 124-785(4)). | Scrip for scrip roll-over is not chosen, or cannot be chosen: 31. An ASF unitholder who does not choose roll-over, or cannot choose roll-over, will acquire their new ACSF units on the Implementation Date (item 3 of the table in section 109-10). 32. Where scrip for scrip roll-over is not chosen, or cannot be chosen, the first element of the cost base and reduced cost base of a replacement ACSF unit received is equal to the market value of each ASF unit cancelled in respect of acquiring the ACSF unit (subsections 110-25(2) and 110-55(2)). The market value is worked out as at the time of the acquisition. Commissioner of Taxation 22 June 2016 | Availability of scrip for scrip roll-over if a capital gain is made: 33. The tax consequences that arise concerning the scheme that is the subject of this Ruling are outlined in the Ruling part of this document. 34. The main tax consequence that is the subject of this Ruling is the availability of scrip for scrip roll-over under Subdivision 124-M. The roll-over enables the holder of a unit or other interest in a trust to disregard a capital gain from a unit or other interest that is cancelled or disposed of if the holder receives a replacement interest in another trust in exchange. It also provides special rules for calculating the cost base and reduced cost base of the replacement interest. 35. Subdivision 124-M contains a number of conditions for, and exceptions to, the holder of an interest in a trust being eligible to choose scrip for scrip roll-over. The main requirements that are relevant to the scheme that is the subject of this Ruling are: 36. Having regard to all the facts comprising the scheme as described in this Ruling, it is considered that for the purposes of paragraph 124-781(1)(b), there are fixed entitlements to all of the income and capital of ASF and ACSF immediately before, during and immediately after the exchange of units that is the subject of this Ruling. 37. The Scheme that is the subject of this Ruling satisfies the requirements for the roll-over under Subdivision 124-M. 38. The following is a detailed contents list for this Ruling: © 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).

Ruling: CGT event C2: 18. CGT event C2 happened when the ASF units held by ASF unitholders came to an end by their cancellation (section 104-25). 19. The time of CGT event C2 is on the Implementation Date (subsection 104-25(2)). 20. A unitholder made a capital gain from CGT event C2 happening if the capital proceeds from the cancellation of a unit exceeded the cost base of that unit (subsection 104-25(3)). 21. A unitholder made a capital loss from CGT event C2 happening if the capital proceeds from the cancellation of a unit were less than its reduced cost base (subsection 104-25(3)). 22. The capital proceeds from CGT event C2 happening to a unit in ASF is the market value of the number of ACSF units received in respect of the cancellation of that unit (subsection 116-20(1)). The market value of an ACSF unit is worked out as at the time of CGT event C2, which is on the Implementation Date. | Availability of scrip for scrip roll-over if a capital gain is made: 23. Subject to the qualification in the following paragraph, a unitholder who made a capital gain from the cancellation of their ASF unit in exchange for ACSF units may choose to obtain scrip for scrip roll-over (sections 124-781 and 124-785). 24. Scrip for scrip roll-over cannot be chosen if any capital gain a unitholder might make from their replacement ACSF units would be disregarded, except because of a roll-over (paragraph 124-795(2)(a)). | Consequences if scrip for scrip roll-over is chosen: 25. If scrip for scrip roll-over is chosen, the capital gain referable to the receipt of ACSF units is disregarded (subsection 124-785(1)). | Consequences if scrip for scrip roll-over is not chosen, or cannot be chosen: 26. An ASF unitholder who does not choose roll-over, or cannot choose roll-over, must take into account any capital gain or capital loss from CGT event C2 happening on the cancellation of their ASF units in working out their net capital gain or net capital loss for the income year in which CGT event C2 happens (sections 102-5 and 102-10). 27. A unitholder who makes a capital gain where roll-over is not chosen, or cannot be chosen, can treat the capital gain as a 'discount capital gain' provided that the conditions of Subdivision 115-A are met. In particular, the ASF units that were cancelled must have been acquired by the unitholder at least 12 months before the Implementation Date. | Cost base and reduced cost base of ACSF units received: 28. The method for calculating the cost base and reduced cost base of the ACSF units acquired by a unitholder in exchange for their ASF units depends on whether scrip for scrip roll-over is chosen. | Scrip for scrip roll-over is chosen: 29. If an ASF unitholder chooses scrip for scrip roll-over, the acquisition date of the new ACSF units for the purposes of making a discount capital gain is the date when they acquired the ASF units that were cancelled to acquire ACSF units (item 2 of the table in subsection 115-30(1)). 30. Where scrip for scrip roll-over is chosen, the first element of the cost base and reduced cost base of a replacement ACSF unit received is worked out by reasonably attributing to it the cost base and reduced cost base (respectively) of the ASF unit for which it was exchanged and for which the roll-over was obtained (subsections 124-785(2) and 124-785(4)). | Scrip for scrip roll-over is not chosen, or cannot be chosen: 31. An ASF unitholder who does not choose roll-over, or cannot choose roll-over, will acquire their new ACSF units on the Implementation Date (item 3 of the table in section 109-10). 32. Where scrip for scrip roll-over is not chosen, or cannot be chosen, the first element of the cost base and reduced cost base of a replacement ACSF unit received is equal to the market value of each ASF unit cancelled in respect of acquiring the ACSF unit (subsections 110-25(2) and 110-55(2)). The market value is worked out as at the time of the acquisition. Commissioner of Taxation 22 June 2016


Appendix: Availability of scrip for scrip roll-over if a capital gain is made: 33. The tax consequences that arise concerning the scheme that is the subject of this Ruling are outlined in the Ruling part of this document. 34. The main tax consequence that is the subject of this Ruling is the availability of scrip for scrip roll-over under Subdivision 124-M. The roll-over enables the holder of a unit or other interest in a trust to disregard a capital gain from a unit or other interest that is cancelled or disposed of if the holder receives a replacement interest in another trust in exchange. It also provides special rules for calculating the cost base and reduced cost base of the replacement interest. 35. Subdivision 124-M contains a number of conditions for, and exceptions to, the holder of an interest in a trust being eligible to choose scrip for scrip roll-over. The main requirements that are relevant to the scheme that is the subject of this Ruling are: 36. Having regard to all the facts comprising the scheme as described in this Ruling, it is considered that for the purposes of paragraph 124-781(1)(b), there are fixed entitlements to all of the income and capital of ASF and ACSF immediately before, during and immediately after the exchange of units that is the subject of this Ruling. 37. The Scheme that is the subject of this Ruling satisfies the requirements for the roll-over under Subdivision 124-M.


What this Ruling is about | NOT LEGALLY BINDING SECTION: | A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. | If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10
Legislative references: TAA 1953 ITAA 1997 ITAA 1997 102-5 ITAA 1997 102-10 ITAA 1997 Div 104 ITAA 1997 104-25 ITAA 1997 104-25(2) ITAA 1997 104-25(3) ITAA 1997 109-10 ITAA 1997 110-25 ITAA 1997 110-25(2) ITAA 1997 110-55 ITAA 1997 110-55(2) ITAA 1997 Subdiv 115-A ITAA 1997 115-30(1) ITAA 1997 116-20 ITAA 1997 Subdiv 124-M ITAA 1997 124-781 ITAA 1997 124-781(1)(b) ITAA 1997 124-781(4) ITAA 1997 124-785(1) ITAA 1997 124-785(2) ITAA 1997 124-785(4)(a) ITAA 1997 Div 230 ITAA 1997 995-1(1) Corporations Act 2001