Class Ruling CR 2008/38
Date of effect: 22 May 2008

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 provision(s) 2. The relevant provision(s) dealt with in this Ruling are: All references to legislative provisions in this Ruling are to the ITAA 1997 unless otherwise stated. Class of entities 3. The class of entities to which this Ruling applies consists of the ordinary shareholders of Dyno Nobel Limited (DNL) who: In this Ruling, a person belonging to this class of entities is referred to as a 'DNL shareholder'. Qualifications 4. 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 12 to 21 of this Ruling. 5. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 6. 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 inquiries concerning reproduction and rights should be addressed to:

Class of entities or scheme: 3. The class of entities to which this Ruling applies consists of the ordinary shareholders of Dyno Nobel Limited (DNL) who: In this Ruling, a person belonging to this class of entities is referred to as a 'DNL shareholder'. | Qualifications: 4. 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 12 to 21 of this Ruling. 5. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 6. 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 inquiries concerning reproduction and rights should be addressed to: 7. This Ruling applies from 22 May 2008 to 30 June 2009. However, the Ruling continues to apply after 30 June 2009 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. 8. The Ruling 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 issue of the Ruling. Furthermore, the Ruling only applies to the extent that: 9. If this Ruling is inconsistent with a later public or private ruling, the relevant class of entities may rely on either ruling which applies to them (item 1 of subsection 357-75(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA)). 10. If this Ruling is inconsistent with an earlier private ruling, the private ruling is taken not to have been made if, when the Ruling is made, the following two conditions are met: 11. If the above two conditions do not apply, the relevant class of entities may rely on either ruling which applies to them (item 3 of subsection 357-75(1) of Schedule 1 to the TAA). 12. The following description of the scheme is based on documents and information provided by PricewaterhouseCoopers (the applicant for this Ruling). The scheme that is the subject of this Ruling is based on the following documents. These documents, or the relevant parts of them, as the case may be, form part of and are to be read in conjunction with this description. Those documents include the following: Note : where certain information has been provided by the applicant on a commercial-in-confidence basis it will not be disclosed or released under the Freedom of Information legislation. | Overview of scheme: 13. The scheme that is the subject of this Ruling is the acquisition of DNL by IPL Bidco, a wholly owned subsidiary of Incitec Pivot Limited (IPL). DNL and IPL are both public companies listed on the Australian Securities Exchange (ASX). | DNL: 14. DNL has approximately 820 million ordinary shares on issue. These ordinary shares are the only shares on issue in DNL. All of the DNL shares were acquired by the DNL shareholders on or after 20 September 1985. 15. IPL owns approximately 13% of the ordinary shares in DNL. | The acquisition of DNL shares: 16. Under a Scheme of Arrangement (the DNL Acquisition Scheme), IPL Bidco will acquire all of the ordinary shares in DNL except for those already owned by IPL. As consideration for the acquisition of those shares, DNL shareholders will choose one of the following three consideration options: (these options are described in the Scheme Booklet). 17. The shares issued as consideration will be in IPL, which is the ultimate holding company of the wholly owned group of companies which includes as a member, IPL Bidco. | Ineligible foreign shareholders: 18. An Ineligible Foreign Dyno Nobel Shareholder is defined in the Scheme Booklet as a person who is registered on the DNL Share Register as a holder of DNL ordinary shares whose address, as shown on the Dyno Nobel Share Register is outside Australia and its external territories, New Zealand, the United States of America, Hong Kong, Singapore or the United Kingdom unless IPL and DNL are each satisfied, acting reasonably, that: 19. A person who is an Ineligible Foreign Dyno Nobel Shareholder on the Scheme Record Date will not receive shares in IPL under the DNL Acquisition Scheme (as described in the Scheme Booklet). Instead, the shares in IPL that would otherwise have been issued to them under the DNL Acquisition Scheme will be issued to a nominee in accordance with the procedures outlined in the Scheme Booklet. The nominee will sell the shares on behalf of, and remit the net proceeds of sale to, the Ineligible Foreign Dyno Nobel Shareholders. | Other matters: 20. Under this scheme, no DNL shareholder will be either a 'significant stakeholder' or 'common stakeholder' within the meaning of those terms in Subdivision 124-M. 21. As soon as practicable after the Implementation Date, DNL will apply for termination of the official quotation of DNL shares on the ASX and to have itself removed from the official list of the ASX. | CGT event A1 happens on the disposal of DNL shares: 22. CGT event A1 will happen when a DNL shareholder disposes of a DNL share on the Implementation Date (subsections 104-10(1) and (2) and paragraph 104-10(3)(b)). | Scrip for scrip roll-over: 23. If a DNL shareholder makes a capital gain from the disposal of their DNL shares, scrip for scrip roll-over can be chosen to the extent that the capital gain is referable to the receipt of IPL shares, subject to the qualification in paragraph 24 of this Ruling (sections 124-780 and 124-790). 24. Scrip for scrip roll-over cannot be chosen if any capital gain the DNL shareholder might make from the IPL shares would be disregarded, except because of a roll-over (subsection 124-795(2)). Commissioner of Taxation 21 May 2008 | CGT event A1 happens on the disposal of DNL shares: 25. CGT event A1 will happen when a DNL shareholder disposes of a DNL share on the Implementation Date (subsections 104-10(1) and (2) and paragraph 104-10(3)(b)). 26. A DNL shareholder will make a capital gain from CGT event A1 happening if the capital proceeds from the disposal of a DNL share exceeds its cost base. The DNL shareholder will make a capital loss if those capital proceeds are less than the DNL share's reduced cost base (subsection 104-10(4)). 27. The capital proceeds for each DNL share will be the sum of: in respect of its disposal (subsections 116-20(1) and 116-40(1)). 28. The market value of an IPL share is worked out at the time the DNL shareholder disposes of the DNL shares. This occurs on the Implementation Date. | If a capital loss is made: 29. If a DNL shareholder makes a capital loss from the disposal of their DNL shares, the amount of the capital loss is taken into account in working out the shareholder's net capital gain or net capital loss for the income year in which the CGT event happens (sections 102-5 and 102-10). | Scrip for scrip roll-over: 30. Subdivision 124-M contains a number of conditions that go to whether scrip for scrip roll-over may be available under an arrangement. The Commissioner considers that the DNL Acquisition Scheme meets these conditions. 31. If a DNL shareholder makes a capital gain from the disposal of their DNL shares, scrip for scrip roll-over can be chosen to the extent that the capital gain is referable to the receipt of IPL shares, subject to the qualification in paragraph 32 of this Ruling (sections 124-780 and 124-790). Therefore, only the part of the capital gain that is referable to the receipt of IPL shares is eligible for scrip for scrip roll-over. 32. Scrip for scrip roll-over cannot be chosen if any capital gain the DNL shareholder might make from the IPL shares would be disregarded, except because of a roll-over (subsection 124-795(2)). | Discount capital gain: 33. DNL shareholders who make capital gains that are not disregarded (that is, capital gains for which scrip for scrip roll-over is not, or cannot, be chosen) can treat the amount of those gains as 'discount capital gains' provided that the conditions in Subdivisions 115-A to 115-C are satisfied. | Cost base of IPL shares: 34. The method for calculating a DNL shareholder's cost base and reduced cost base of the IPL shares received under the DNL Acquisition Scheme depends on whether the shareholder chooses scrip for scrip roll-over. | Scrip for scrip roll-over is not chosen: 35. Where scrip for scrip roll-over is not chosen, the first element of the DNL shareholder's cost base and reduced cost base of each IPL share is equal to the market value of property (that is, the relevant part of the DNL shares) given in exchange for the IPL share (subsections 110-25(2) and 110-55(2)). | Scrip for scrip roll-over is chosen: 36. Where scrip for scrip roll-over is chosen, the first element of the DNL shareholder's cost base and reduced cost base of each IPL share is the sum of parts of the cost base of the DNL shares that is reasonably attributable to the acquisition of the IPL shares (subsections 124-785(2) and 124-785(4)). | Acquisition date of IPL shares: 37. The acquisition date for DNL shareholders of IPL shares acquired in exchange for their DNL shares is the date that the IPL shares are issued to the DNL shareholder (the Implementation Date) (section 109-10). 38. However, for the purposes of applying the CGT discount to any later disposal of their IPL shares, DNL shareholders who choose scrip for scrip roll-over are taken to have acquired their IPL shares when they acquired the original DNL shares (item 2 of the table in subsection 115-30(1)). 39. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: CGT event A1 happens on the disposal of DNL shares: 22. CGT event A1 will happen when a DNL shareholder disposes of a DNL share on the Implementation Date (subsections 104-10(1) and (2) and paragraph 104-10(3)(b)). | Scrip for scrip roll-over: 23. If a DNL shareholder makes a capital gain from the disposal of their DNL shares, scrip for scrip roll-over can be chosen to the extent that the capital gain is referable to the receipt of IPL shares, subject to the qualification in paragraph 24 of this Ruling (sections 124-780 and 124-790). 24. Scrip for scrip roll-over cannot be chosen if any capital gain the DNL shareholder might make from the IPL shares would be disregarded, except because of a roll-over (subsection 124-795(2)). Commissioner of Taxation 21 May 2008


Appendix: CGT event A1 happens on the disposal of DNL shares: 25. CGT event A1 will happen when a DNL shareholder disposes of a DNL share on the Implementation Date (subsections 104-10(1) and (2) and paragraph 104-10(3)(b)). 26. A DNL shareholder will make a capital gain from CGT event A1 happening if the capital proceeds from the disposal of a DNL share exceeds its cost base. The DNL shareholder will make a capital loss if those capital proceeds are less than the DNL share's reduced cost base (subsection 104-10(4)). 27. The capital proceeds for each DNL share will be the sum of: in respect of its disposal (subsections 116-20(1) and 116-40(1)). 28. The market value of an IPL share is worked out at the time the DNL shareholder disposes of the DNL shares. This occurs on the Implementation Date. | If a capital loss is made: 29. If a DNL shareholder makes a capital loss from the disposal of their DNL shares, the amount of the capital loss is taken into account in working out the shareholder's net capital gain or net capital loss for the income year in which the CGT event happens (sections 102-5 and 102-10). | Scrip for scrip roll-over: 30. Subdivision 124-M contains a number of conditions that go to whether scrip for scrip roll-over may be available under an arrangement. The Commissioner considers that the DNL Acquisition Scheme meets these conditions. 31. If a DNL shareholder makes a capital gain from the disposal of their DNL shares, scrip for scrip roll-over can be chosen to the extent that the capital gain is referable to the receipt of IPL shares, subject to the qualification in paragraph 32 of this Ruling (sections 124-780 and 124-790). Therefore, only the part of the capital gain that is referable to the receipt of IPL shares is eligible for scrip for scrip roll-over. 32. Scrip for scrip roll-over cannot be chosen if any capital gain the DNL shareholder might make from the IPL shares would be disregarded, except because of a roll-over (subsection 124-795(2)). | Discount capital gain: 33. DNL shareholders who make capital gains that are not disregarded (that is, capital gains for which scrip for scrip roll-over is not, or cannot, be chosen) can treat the amount of those gains as 'discount capital gains' provided that the conditions in Subdivisions 115-A to 115-C are satisfied. | Cost base of IPL shares: 34. The method for calculating a DNL shareholder's cost base and reduced cost base of the IPL shares received under the DNL Acquisition Scheme depends on whether the shareholder chooses scrip for scrip roll-over. | Scrip for scrip roll-over is not chosen: 35. Where scrip for scrip roll-over is not chosen, the first element of the DNL shareholder's cost base and reduced cost base of each IPL share is equal to the market value of property (that is, the relevant part of the DNL shares) given in exchange for the IPL share (subsections 110-25(2) and 110-55(2)). | Scrip for scrip roll-over is chosen: 36. Where scrip for scrip roll-over is chosen, the first element of the DNL shareholder's cost base and reduced cost base of each IPL share is the sum of parts of the cost base of the DNL shares that is reasonably attributable to the acquisition of the IPL shares (subsections 124-785(2) and 124-785(4)). | Acquisition date of IPL shares: 37. The acquisition date for DNL shareholders of IPL shares acquired in exchange for their DNL shares is the date that the IPL shares are issued to the DNL shareholder (the Implementation Date) (section 109-10). 38. However, for the purposes of applying the CGT discount to any later disposal of their IPL shares, DNL shareholders who choose scrip for scrip roll-over are taken to have acquired their IPL shares when they acquired the original DNL shares (item 2 of the table in subsection 115-30(1)).


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, we must apply the law to you in the way set out in the ruling (or in a way that is more favourable for you if we are satisfied that the ruling is incorrect and disadvantages you, and we are 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. | If a capital gain is made | Appendix 2 - Detailed contents list


Legislative references: ITAA 1936 6(1) ITAA 1997 ITAA 1997 102-5 ITAA 1997 102-10 ITAA 1997 104-10 ITAA 1997 104-10(1) ITAA 1997 104-10(2) ITAA 1997 104-10(3)(b) ITAA 1997 104-10(4) ITAA 1997 109-10 ITAA 1997 110-25(2) ITAA 1997 110-55(2) ITAA 1997 Subdiv 115-A ITAA 1997 Subdiv 115-B ITAA 1997 Subdiv 115-C ITAA 1997 115-30(1) ITAA 1997 116-20(1) ITAA 1997 116-40(1) ITAA 1997 Subdiv 124-M ITAA 1997 124-780 ITAA 1997 124-785(2) ITAA 1997 124-785(4) ITAA 1997 124-790 ITAA 1997 124-795(2) ITAA 1997 Subdiv 130-D TAA 1953 TAA 1953 Sch 1 357-75(1) Copyright Act 1968
Subject references: arrangement CGT capital proceeds CGT events CGT cost base CGT roll-over relief disposal of shares market value cost base ordinary share Schemes of arrangement scrip for scrip roll-over shareholders