Taxation Determination TD 2004/50
Date of effect: 6 October 2004







The number, subject heading, date of effect and paragraphs 1 to 3 of this document are a 'public ruling' for the purposes of Part IVAAA of the Taxation Administration Act 1953 and are legally binding on the Commissioner. | 1. No. The single entity rule in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997) is not relevant in determining the eligibility for rollover of the shareholders of the original company. | 2. The single entity rule only applies for the income tax purposes of members of a consolidated group. The shareholders in the original company are not members of the consolidated group and the single entity rule does not apply to them. From their perspective, the relevant conditions for the arrangement and for the rollover in Subdivision 124-M of the ITAA 1997 must be considered on the basis that the acquiring company and its head company (and any interposed entities) are separate entities for income tax purposes. | 3. Thus, for example, in considering the application of subparagraph 124-780(2)(a)(ii) or 124-780(3)(c)(ii) of the ITAA 1997, the single entity rule can have no impact on identifying which is the relevant entity. | Example: 4. H Co, a listed public company, is the head company of a consolidated group. Under a scrip for scrip arrangement, a subsidiary member of the group, B Co, makes an offer to the shareholders in Target Co to acquire their ordinary shares in exchange for an issue of shares in H Co. On the implementation of the arrangement, B Co becomes the legal owner of more than 80% of the voting shares in Target Co . | 5. The single entity rule cannot apply for the purposes of determining whether original shareholders in Target Co can obtain CGT rollover relief under Subdivision 124-M of the ITAA 1997 for a capital gain made on the disposal of their interests in Target Co. Accordingly, the conditions in subparagraphs 124-780(2)(a)(ii) and 124-780(3)(c)(ii) will be satisfied because : | Date of effect: 6. This Determination applies to years commencing both before and after its date of issue. However, it does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). | Commissioner of Taxation 6 October 2004 | Previously issued in draft form as TD 2004/D20


Related rulings: TR 92/20
Legislative references: TAA 1953 Pt IVAAA ITAA 1997 Subdiv 124-M ITAA 1997 124-780(2)(a)(ii) ITAA 1997 124-780(3)(c)(ii) ITAA 1997 701-1
Subject references: capital gains tax CGT exemptions consolidation consolidation - capital gains tax head company scrip for scrip rollover single entity rule ultimate holding company wholly-owned group