Class Ruling CR 2010/68
Date of effect: 1 July 2010

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. Relevant provision(s) 2. The relevant provisions dealt with in this Ruling are: All subsequent 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 ordinary shareholders of Suncorp-Metway Limited (SML) that: 4. In this Ruling, the entities belonging to this class are referred to as 'participating shareholders'. 5. This Ruling does not apply in respect of the ordinary shares of SML that were: Qualifications 6. This Ruling does not provide guidance on whether the participating shareholders hold their shares as revenue assets (as defined by section 977-50) or that their shares constitute trading stock (as defined in section 995-1). 7. The class of entities defined in this Ruling may rely on its contents provided the arrangement actually carried out is carried out in accordance with the scheme described in paragraphs 11 to 30 of this Ruling. 8. If the Scheme actually carried out is materially different from the Scheme that is described in this Ruling, then: 9. This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquires concerning reproduction and rights should be addressed to:

Class of entities or scheme: 3. The class of entities to which this Ruling applies are the ordinary shareholders of Suncorp-Metway Limited (SML) that: 4. In this Ruling, the entities belonging to this class are referred to as 'participating shareholders'. 5. This Ruling does not apply in respect of the ordinary shares of SML that were: | Qualifications: 6. This Ruling does not provide guidance on whether the participating shareholders hold their shares as revenue assets (as defined by section 977-50) or that their shares constitute trading stock (as defined in section 995-1). 7. The class of entities defined in this Ruling may rely on its contents provided the arrangement actually carried out is carried out in accordance with the scheme described in paragraphs 11 to 30 of this Ruling. 8. If the Scheme actually carried out is materially different from the Scheme that is described in this Ruling, then: 9. This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquires concerning reproduction and rights should be addressed to: 10. This Ruling applies from 1 July 2010 to 30 June 2011. However, this Ruling continues to apply after 30 June 2011 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). 11. The following description of the scheme is based on information provided to the Commissioner. The following documents or relevant parts of them form part of and are to be read with the description: Note: certain information received from Greenwoods & Freehills Pty Limited has been provided on a commercial-in-confidence basis and will not be disclosed or released under the Freedom of Information legislation. | The Suncorp Group: 12. The Suncorp Group is a diversified financial services group that operates in general insurance, banking, life insurance and wealth management in Australia and New Zealand. 13. SML is the holding company for the Suncorp Group and the head company of a consolidated group for Australian income tax purposes. 14. SML is a public company limited by shares and admitted to the official list of the Australian Securities Exchange Limited (ASX); and has on issue: 15. All of the shares in SML were acquired by their respective holders on or after 20 September 1985. 16. SML has, at all relevant times, been a registered approved deposit-taking institution (ADI), that is, a licensed bank, under the Banking Act 1959 . This status authorises SML to carry on banking business in Australia. SML will continue to be an ADI from the time that the scheme takes place. | Suncorp Group Ltd (SGL): 17. SGL is a public company limited by shares and has one ordinary share on issue which is owned by SML. | The Reorganisation: 18. On 28 October 2010, the Suncorp Group announced that it will undertake an internal reorganisation (the Reorganisation) which will include the following components: 19. The tax consequences for the participating shareholders arise as a result of the first step in the Reorganisation, the interposition. | The interposition: 20. The interposition of SGL between SML and its ordinary shareholders will be undertaken by way of a court-approved scheme of arrangement (the scheme of arrangement) under subsection 411(6) of the Corporations Act 2001 . 21. All SML shareholders registered at 7:00pm (Sydney time) on 4 January 2011 (the Record Date) will participate in the exchange. 22. The scheme of arrangement requires the approval of the requisite majority of ordinary shareholders at the scheme meeting, which will be held on 15 December 2010, and court approval. It is also subject to the satisfaction of additional conditions precedent including regulatory approvals. 23. If approved, on 7 January 2011 (the Implementation Date), the interposition will be implemented according to the terms of the scheme of arrangement by the following steps: | Ineligible foreign shareholders: 24. Certain overseas shareholders (Ineligible Foreign Shareholders) are ineligible to receive SGL shares under the scheme. SGL shares that would otherwise have been issued to those shareholders in exchange for their ordinary shares will instead be issued to a nominee or sale agent. 25. Under the terms of the scheme, the shares will be sold within 20 days of the Implementation Date. The sale proceeds (net of expenses) will be remitted to the relevant Ineligible Foreign Shareholder. | Other matters: 26. Following the exchange, SGL will buy back and cancel the SGL share owned by SML. The buy-back and cancellation will take place immediately after SGL shares are issued to SML shareholders. 27. The holders of reset preference shares and convertible preference shares will not participate in the scheme nor will they be entitled to vote on the scheme of arrangement. 28. SGL will be a NOHC within the meaning of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Restructure Act) once the scheme takes place. 29. A restructure instrument under Part 4A of the Restructure Act will be in force in relation to SGL for the purposes of the scheme within the meaning of that Act. 30. The tax consolidated group originally comprising SML (as head company) and its member entities will continue in existence after the scheme with SGL as its head company (section 703-70). | CGT event A1: 31. CGT event A1 happens when the SML shareholders exchange their SML shares for shares in SGL (subsections 104-10(1) and (2)). The time of the event is on or about 7 January 2011, the Implementation Date for the scheme of arrangement (paragraph 104-10(3)(b)). | Subdivision 124-G roll-over: 32. The participating shareholders will be taken to have chosen roll-over under Subdivision 124-G for the exchange of each of their SML shares for SGL shares (subsection 124-360(2)). | SML shares that are not held as trading stock or revenue assets: 33. The consequences under Subdivision 124-G for the participating shareholders who do not hold their SML shares as revenue assets or as trading stock are as follows: 34. The participating shareholders acquire the SGL shares when they become the owner of the SGL shares (item 2 of the table in section 109-10). This occurs on the Implementation Date for the scheme. 35. However, for the purposes of determining eligibility for the CGT discount to any later disposal of their SGL shares, participating shareholders will be taken to have acquired their SGL shares when they acquired the corresponding SML shares (item 2 of the table in subsection 115-30(1)). | SML shares held as revenue assets: 36. For each participating shareholder who holds SML shares as revenue assets (as defined in section 977-50) immediately prior to the disposal of those shares under the exchange, there will be additional consequences under section 124-390, namely: | SML shares held as trading stock: 37. The consequences under Subdivision 124-G for the participating shareholders who hold their SML shares as trading stock will, under paragraph 124-390(1)(a) and subsections (2) and (3) be as follows: 38. A participating shareholder who holds the SGL shares as trading stock will be entitled, in the income year in which the trading stock is considered to be 'on hand', to a deduction under section 8-1 equal to the total amounts included in the assessable income of that participating shareholder under subsection 124-390(2). | Anti-avoidance provision: 39. The Commissioner will not make a determination under section 45B of the ITAA 1936 that section 45C of the ITAA 1936 applies to the whole or any part of the capital benefits received by the participating shareholders. Commissioner of Taxation 1 December 2010 | Roll-over under Subdivision 124-G: 40. The participating shareholders will be taken, under subsection 124-360(2), to have chosen to obtain the roll-over because: 41. This conclusion follows in part as a result of the effect of section 124-382 which modifies the operation of Subdivision 124-G for 'ADI restructures'. Section 124-382 applies in this case on the basis that: 42. The application of section 124-382 has two significant consequences for the present arrangement. 43. Firstly, it provides that certain preference shares can be disregarded for the purposes of applying the conditions in Subdivision 124-G (subsection 124-382(2)). Accordingly, the reset preference shares and convertible preference shares are disregarded under this provision. Consequently, the conditions referred to in paragraph 40 of this Ruling will be satisfied even though the holders of these instruments will not exchange their shares under the arrangement. 44. The second consequence of section 124-382 relates to foreign shareholders. It provides that, where certain conditions relating to a nominee sale arrangement are put in place, shares in the original company held by foreign shareholders can also be disregarded for the purposes of Subdivision 124-G. It is considered that these conditions will be satisfied in relation to the shares in SML owned by the Ineligible Foreign Shareholders. Accordingly, the conditions of Subdivision 124-G will be satisfied even though the SGL shares will be received not by those shareholders but by a nominee or sale agent. | SML shares that are not held as trading stock or revenue assets: 45. For the participating shareholders who do not hold their SML shares as trading stock or revenue assets the roll-over consequences for the participating shareholders are as set out in paragraphs 33 to 35 of this Ruling. | SML shares held as revenue assets: 46. Subsections 124-390(4) and 124-390(5) provide an income tax deferral for the participating shareholders who hold their SML shares as revenue assets (as defined in section 977-50) immediately prior to the disposal of those shares under the exchange. The consequences of obtaining roll-over to give effect to section 124-390 is that the disposal of the SML shares in exchange for the SGL shares results in the deferral of any profit or loss that arises as a direct consequence of the exchange. 47. For each replacement share in SGL, the participating shareholder will be taken to have paid the total of the participating shareholder's subsection 124-390(4) amounts divided by the number of SGL shares that the participating shareholder acquires under the exchange (subsection 124-390(5)). | SML shares held as trading stock: 48. For the participating shareholders who hold all or some of their SML shares as trading stock there will be additional consequences under subsection 124-360(2). 49. Under the trading stock provisions, the disposal of an SML share under the exchange by one of these participating shareholders would normally result in either: 50. Subsection 124-390(2) changes the amount that is included in assessable income to an amount that is equal to: 51. Under subsection 124-390(3), the participating shareholder will be taken to have paid an amount for each of the SGL shares that the participating shareholder acquires in return for their SML shares that were trading stock at that time. That amount is calculated by the following formula: 52. The total of the amounts included under subsection 124-390(2) is, broadly, either the 'cost' or the 'value' of those SML shares to the participating shareholder. Therefore, the participating shareholder will be taken to have paid that same 'cost' or 'value' for those SGL shares acquired under the exchange. In accordance with subsection 70-15(2), the participating shareholder will be entitled to a deduction for this acquisition 'cost' under section 8-1 provided that the SGL shares are considered to be on hand. | Anti-avoidance provision: 53. Section 45B of the ITAA 1936 applies where certain capital payments are paid to shareholders in substitution for dividends. In broad terms, section 45B of the ITAA 1936 applies where: 54. Under the present scheme, each of the participating shareholders will receive SGL shares which will constitute the provision of a capital benefit. 55. If the amount of tax payable by a participating shareholder would be payable at a later time (as a result of the roll-over under Subdivision 124-G of the ITAA 1997) than it would be payable if the capital benefit had been a dividend, then the participating shareholder will obtain a tax benefit in accordance with paragraph 45B(2)(b) of the ITAA 1936. 56. However, under the present scheme, the requisite purpose of enabling the participating shareholder to obtain a tax benefit is not present. Having regard to the 'relevant circumstances' of the scheme, as set out in subsection 45B(8) of the ITAA 1936, it is apparent that none of the persons who entered into or carried out the scheme, or any part of it, did so for the requisite purpose of enabling a participating shareholder to obtain a tax benefit. 57. Accordingly, the Commissioner will not make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the whole, or a part, of the capital benefit received by any of the participating shareholders. 58. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: CGT event A1: 31. CGT event A1 happens when the SML shareholders exchange their SML shares for shares in SGL (subsections 104-10(1) and (2)). The time of the event is on or about 7 January 2011, the Implementation Date for the scheme of arrangement (paragraph 104-10(3)(b)). | Subdivision 124-G roll-over: 32. The participating shareholders will be taken to have chosen roll-over under Subdivision 124-G for the exchange of each of their SML shares for SGL shares (subsection 124-360(2)). | SML shares that are not held as trading stock or revenue assets: 33. The consequences under Subdivision 124-G for the participating shareholders who do not hold their SML shares as revenue assets or as trading stock are as follows: 34. The participating shareholders acquire the SGL shares when they become the owner of the SGL shares (item 2 of the table in section 109-10). This occurs on the Implementation Date for the scheme. 35. However, for the purposes of determining eligibility for the CGT discount to any later disposal of their SGL shares, participating shareholders will be taken to have acquired their SGL shares when they acquired the corresponding SML shares (item 2 of the table in subsection 115-30(1)). | SML shares held as revenue assets: 36. For each participating shareholder who holds SML shares as revenue assets (as defined in section 977-50) immediately prior to the disposal of those shares under the exchange, there will be additional consequences under section 124-390, namely: | SML shares held as trading stock: 37. The consequences under Subdivision 124-G for the participating shareholders who hold their SML shares as trading stock will, under paragraph 124-390(1)(a) and subsections (2) and (3) be as follows: 38. A participating shareholder who holds the SGL shares as trading stock will be entitled, in the income year in which the trading stock is considered to be 'on hand', to a deduction under section 8-1 equal to the total amounts included in the assessable income of that participating shareholder under subsection 124-390(2). | Anti-avoidance provision: 39. The Commissioner will not make a determination under section 45B of the ITAA 1936 that section 45C of the ITAA 1936 applies to the whole or any part of the capital benefits received by the participating shareholders. Commissioner of Taxation 1 December 2010


Appendix: Roll-over under Subdivision 124-G: 40. The participating shareholders will be taken, under subsection 124-360(2), to have chosen to obtain the roll-over because: 41. This conclusion follows in part as a result of the effect of section 124-382 which modifies the operation of Subdivision 124-G for 'ADI restructures'. Section 124-382 applies in this case on the basis that: 42. The application of section 124-382 has two significant consequences for the present arrangement. 43. Firstly, it provides that certain preference shares can be disregarded for the purposes of applying the conditions in Subdivision 124-G (subsection 124-382(2)). Accordingly, the reset preference shares and convertible preference shares are disregarded under this provision. Consequently, the conditions referred to in paragraph 40 of this Ruling will be satisfied even though the holders of these instruments will not exchange their shares under the arrangement. 44. The second consequence of section 124-382 relates to foreign shareholders. It provides that, where certain conditions relating to a nominee sale arrangement are put in place, shares in the original company held by foreign shareholders can also be disregarded for the purposes of Subdivision 124-G. It is considered that these conditions will be satisfied in relation to the shares in SML owned by the Ineligible Foreign Shareholders. Accordingly, the conditions of Subdivision 124-G will be satisfied even though the SGL shares will be received not by those shareholders but by a nominee or sale agent. | SML shares that are not held as trading stock or revenue assets: 45. For the participating shareholders who do not hold their SML shares as trading stock or revenue assets the roll-over consequences for the participating shareholders are as set out in paragraphs 33 to 35 of this Ruling. | SML shares held as revenue assets: 46. Subsections 124-390(4) and 124-390(5) provide an income tax deferral for the participating shareholders who hold their SML shares as revenue assets (as defined in section 977-50) immediately prior to the disposal of those shares under the exchange. The consequences of obtaining roll-over to give effect to section 124-390 is that the disposal of the SML shares in exchange for the SGL shares results in the deferral of any profit or loss that arises as a direct consequence of the exchange. 47. For each replacement share in SGL, the participating shareholder will be taken to have paid the total of the participating shareholder's subsection 124-390(4) amounts divided by the number of SGL shares that the participating shareholder acquires under the exchange (subsection 124-390(5)). | SML shares held as trading stock: 48. For the participating shareholders who hold all or some of their SML shares as trading stock there will be additional consequences under subsection 124-360(2). 49. Under the trading stock provisions, the disposal of an SML share under the exchange by one of these participating shareholders would normally result in either: 50. Subsection 124-390(2) changes the amount that is included in assessable income to an amount that is equal to: 51. Under subsection 124-390(3), the participating shareholder will be taken to have paid an amount for each of the SGL shares that the participating shareholder acquires in return for their SML shares that were trading stock at that time. That amount is calculated by the following formula: 52. The total of the amounts included under subsection 124-390(2) is, broadly, either the 'cost' or the 'value' of those SML shares to the participating shareholder. Therefore, the participating shareholder will be taken to have paid that same 'cost' or 'value' for those SGL shares acquired under the exchange. In accordance with subsection 70-15(2), the participating shareholder will be entitled to a deduction for this acquisition 'cost' under section 8-1 provided that the SGL shares are considered to be on hand. | Anti-avoidance provision: 53. Section 45B of the ITAA 1936 applies where certain capital payments are paid to shareholders in substitution for dividends. In broad terms, section 45B of the ITAA 1936 applies where: 54. Under the present scheme, each of the participating shareholders will receive SGL shares which will constitute the provision of a capital benefit. 55. If the amount of tax payable by a participating shareholder would be payable at a later time (as a result of the roll-over under Subdivision 124-G of the ITAA 1997) than it would be payable if the capital benefit had been a dividend, then the participating shareholder will obtain a tax benefit in accordance with paragraph 45B(2)(b) of the ITAA 1936. 56. However, under the present scheme, the requisite purpose of enabling the participating shareholder to obtain a tax benefit is not present. Having regard to the 'relevant circumstances' of the scheme, as set out in subsection 45B(8) of the ITAA 1936, it is apparent that none of the persons who entered into or carried out the scheme, or any part of it, did so for the requisite purpose of enabling a participating shareholder to obtain a tax benefit. 57. Accordingly, the Commissioner will not make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the whole, or a part, of the capital benefit received by any of the participating shareholders.


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. | Total of the amounts included in the participating shareholder's assessable income under subsection 124-390(2) for the SML shares Number of those SGL shares | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10
Legislative references: ITAA 1936 6(1) ITAA 1936 45B ITAA 1936 45B(2)(a) ITAA 1936 45B(2)(b) ITAA 1936 45B(2)(c) ITAA 1936 45B(3) ITAA 1936 45B(8) ITAA 1936 45C ITAA 1936 Pt III Div 13A ITAA 1936 139E ITAA 1997 ITAA 1997 6-5 ITAA 1997 8-1 ITAA 1997 70-15(2) ITAA 1997 70-40 ITAA 1997 70-45 ITAA 1997 70-80(1) ITAA 1997 70-90(1) ITAA 1997 Div 83A ITAA 1997 Subdiv 83A-C ITAA 1997 104-10 ITAA 1997 104-10(1) ITAA 1997 104-10(2) ITAA 1997 104-10(3)(b) ITAA 1997 109-10 ITAA 1997 115-30 ITAA 1997 115-30(1) ITAA 1997 Subdiv 124-A ITAA 1997 Subdiv 124-G ITAA 1997 124-15 ITAA 1997 124-15(2) ITAA 1997 124-15(3) ITAA 1997 124-10(4) ITAA 1997 Div 230 ITAA 1997 124-360 ITAA 1997 124-360(1) ITAA 1997 124-360(1)(c) ITAA 1997 124-360(2) ITAA 1997 124-365 ITAA 1997 124-365(1) ITAA 1997 124-365(3) ITAA 1997 124-365(4)(a) ITAA 1997 124-380 ITAA 1997 124-380(1) ITAA 1997 124-380(3) ITAA 1997 124-380(5) ITAA 1997 124-382 ITAA 1997 124-382(1)(a) ITAA 1997 124-382(1)(b) ITAA 1997 124-382(1)(c) ITAA 1997 124-382(1)(d) ITAA 1997 124-382(2) ITAA 1997 124-390 ITAA 1997 124-390(1)(a) ITAA 1997 124-390(2) ITAA 1997 124-390(3) ITAA 1997 124-390(4) ITAA 1997 124-390(5) ITAA 1997 703-70 ITAA 1997 977-50 ITAA 1997 995-1 TAA 1953 Banking Act 1959 Copyright Act 1968 Corporations Act 2001 411(6) Financial Sector (Business Transfer and Group Restructure) Act 1999
Subject references: assessable income general deduction replacement asset roll-over