Class Ruling CR 2016/71
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 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 provisions of the ITAA 1997, unless otherwise stated. Class of entities 3. The class of entities to which this Ruling applies is holders of ordinary shares in BG Group plc (BG) at the time BG was acquired by Royal Dutch Shell plc (Shell) (the Combination) that: 4. The class of entities includes Australian employees of BG and its subsidiaries in respect of any BG Shares which were: (Note: The Australian income tax consequences of the Combination for BG employees who received Shell Rights and / or Shell Shares in exchange for unvested BG Rights and / or BG Shares which, prior to the Combination, were subject to a BG employee share scheme, are set out in Class Ruling CR 2016/59). 5. In this Ruling, a person belonging to the class of entities is referred to as a 'Shareholder'. Qualifications 6. The Commissioner makes the Ruling based on the precise scheme identified in this Ruling. 7. 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 10 to 20 of this Ruling. 8. 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 is holders of ordinary shares in BG Group plc (BG) at the time BG was acquired by Royal Dutch Shell plc (Shell) (the Combination) that: 4. The class of entities includes Australian employees of BG and its subsidiaries in respect of any BG Shares which were: (Note: The Australian income tax consequences of the Combination for BG employees who received Shell Rights and / or Shell Shares in exchange for unvested BG Rights and / or BG Shares which, prior to the Combination, were subject to a BG employee share scheme, are set out in Class Ruling CR 2016/59). 5. In this Ruling, a person belonging to the class of entities is referred to as a 'Shareholder'. | Qualifications: 6. The Commissioner makes the Ruling based on the precise scheme identified in this Ruling. 7. 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 10 to 20 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 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). 10. 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. 11. BG is a company incorporated in the United Kingdom and has subsidiary entities in Australia. 12. Shell is incorporated in the United Kingdom and a tax-resident of the Netherlands. 13. BG shares were traded on the London Stock Exchange. 14. Shell has ordinary shares consisting of Shell A shares and Shell B shares (Shell Shares). These are traded on the London, New York and Amsterdam stock exchanges. 15. Shell acquired 100% of BG Shares by way of a court approved scheme of arrangement. Court approval was granted on 11 February 2016 (the Court Order Date). 16. The Combination came into effect on 15 February 2016 (the Combination Date). 17. Some, but not all, interests in BG employee share scheme plans vested on the Court Order Date. Employees shareholders whose BG Shares vested, or whose BG Rights vested and were automatically exercised on that date became shareholders of BG in relation to those interests and participated in the scheme of arrangement in the same way as all other BG Shareholders. 18. Under the terms of the Combination, all BG Shareholders received GBP3.83 in cash and 0.4454 Shell B Shares (Default Consideration) for each BG Share they held, unless they actively elected to: 19. The Shell A Share Alternative and the Mix and Match Facility discussed in this paragraph, together with the Default Consideration, are collectively referred to in this Ruling as the 'Combination consideration alternatives'. | Other matters: 20. Shell did not make a choice under subsection 124-795(4). | CGT event A1: 21. CGT event A1 happened when Shareholders disposed of their BG Shares in exchange for the Combination consideration alternatives (section 104-10). 22. The time when CGT event A1 happened to the BG Shares was the date on which the Combination occurred via the Court Sanction (11 February 2016) (paragraph 104-10(3)(b)). 23. A Shareholder made a capital gain when CGT event A1 happened to the BG Shares if the capital proceeds from the disposal of a BG Share exceeded the cost base of that share. The capital gain is the amount of the excess (subsection 104-10(4)). 24. A Shareholder made a capital loss when CGT event A1 happened to the BG Shares if the capital proceeds from the disposal of a BG Share were less than the reduced cost base of that share. The capital loss is the amount of the difference (subsection 104-10(4)). 25. The capital proceeds from CGT event A1 happening to a BG Share is the: 26. The market value of the Combination consideration alternatives received is worked out as at the time of CGT event A1, which is on the Court Sanction Date (11 February 2016) (subsection 116-20(1)). | Availability of partial scrip for scrip roll-over if a capital gain is made: 27. Subject to the qualification in paragraph 28, a Shareholder who made a capital gain from the disposal of their BG Shares may choose to obtain partial scrip for scrip roll-over for that part of the capital gain that is referable only to the receipt of the Shell Shares. See paragraphs 33-36 below where some or all of the proceeds received in exchange for BG Shares was cash. 28. Scrip for scrip roll-over cannot be chosen if, should the shareholder make another capital gain upon a subsequent CGT event happening to the replacement Shell Shares, that capital gain would be disregarded, except because of a roll-over (paragraph 124-795(2)(a)). For example, where the replacement Shell Shares are held as trading stock. | Capital gain is partially disregarded: 29. If a Shareholder chooses scrip for scrip roll-over, the part of the capital gain that is referable to the receipt of Shell Shares is disregarded (subsections 124-785(1) and 124-790(1)). See paragraphs 33-36 below where some or all of the proceeds received in exchange for BG Shares was cash. | Acquisition date of the new Shell Shares: 30. If a Shareholder chooses scrip for scrip roll-over, the acquisition date of the new Shell Shares for the purposes of entitlement to a discount capital gain should a subsequent CGT event happen to the Shell Shares (such as a disposal of the Shell Shares) is the date when the shareholder acquired the BG Shares that were exchanged for the new Shell Shares (item 2 of the table in subsection 115-30(1)). 31. Where a BG employee was subject to a 'deferred taxing point' prior to, or as a result of the Combination, any period where the interests in BG Shares were held as BG Rights is not taken into account in determining when the employees acquired their BG Shares (and therefore are not taken into account in determining when the employees acquired their Shell Shares). | Cost base and reduced cost base of new Shell Shares received: 32. If a Shareholder chooses scrip for scrip roll-over, the first element of the cost base and reduced cost base of replacement new Shell Shares received (in exchange for their BG Shares) is worked out by reasonably attributing the cost base and reduced cost base (respectively) of the BG Shares which were exchanged and for which the roll-over was obtained (subsections 124-785(2) and 124-785(4)). The cost base and reduced cost base of the BG Shares exchanged by a shareholder is reduced by so much of it that is referable to the receipt of cash (subsection 124-785(3)). | Cash component: 33. To the extent a BG Shareholder received cash in exchange for their BG Shares, no CGT roll-over is available. 34. Where a BG Shareholder received: the BG Shareholder may choose partial CGT scrip-for-scrip roll-over for the Shell Shares received (the cost base and reduced cost base outcomes for the Shell Shares received are set out in paragraph 32). Where the shareholder makes the choice, then for the cash received in exchange for the BG Shares, the shareholder makes: 35. Where a Shareholder received consideration in foreign cash (such as GBP3.83 per BG Share where the Default Consideration was received), the Australian dollar value of any cash received must be worked out on the Court Sanction Date (11 February 2016). 36. The relevant portion of the cost base or reduced cost base of BG shares which are exchanged for Shell Shares and cash is the amount that is reasonably attributable to each respectively (subsection 124-790(2)). | Capital gain is not disregarded: 37. A Shareholder who does not choose scrip for scrip roll-over, or cannot choose the roll-over, must take into account any capital gain or capital loss made as a result of CGT event A1 happening on the disposal of their BG Shares in working out their net capital gains, or for determining any current or carried forward capital losses for the income year in which CGT event A1 happens (sections 102-5 and 102-10). 38. A Shareholder, who makes a capital gain where scrip for scrip roll-over is not chosen, or cannot be chosen, is entitled to treat the capital gain as a 'discount capital gain' provided that the conditions of Subdivision 115-A are met. In particular, the BG Shares were acquired, or taken to have been acquired, by the shareholder at least 12 months before the Court Sanction Date (11 February 2016). Where a subsequent CGT event happened to the Shell Shares such as a later disposal of the shares, the period when the Shell Shareholder previously held BG Shares is not taken into account. | Acquisition date of the new Shell Shares: 39. A Shareholder who does not choose scrip for scrip roll-over, or cannot choose the roll-over, acquired their new Shell Shares on the Court Sanction Date (11 February 2016) (item 2 of the table in section 109-10). | Cost base and reduced cost base of new Shell Shares: 40. If a Shareholder does not choose scrip for scrip roll-over, or cannot choose the roll-over, the first element of the cost base and reduced cost base of the replacement new Shell Shares received is equal to the market value of the BG Shares given in respect of acquiring the new Shell Shares (subsections 110-25(2) and 110-55(2)). The market value of the BG Shares given is worked out on the Court Sanction Date (11 February 2016). The cost base or reduced cost base of new Shell Shares received does not include any portion of the market value of the BG Shares that was given in exchange for the cash consideration received (subsection 112-30(1)). Commissioner of Taxation 12 October 2016 | Availability of scrip for scrip roll-over if a capital gain is made: 41. The tax consequences that arise concerning the scheme that is the subject of this Ruling are outlined in the Ruling part of this document. 42. The main tax consequences for Australian shareholders that are the subject of this Ruling are: 43. The roll-over enables a shareholder to disregard any part of the capital gain from a share that is disposed of if the shareholder receives a replacement share in exchange. Any part of the capital gain that is referable to the receipt of cash is not disregarded because it is ineligible proceeds for which the roll-over is not available. It also provides special rules for calculating the cost base and reduced cost base of the replacement share. 44. Subdivision 124-M contains a number of conditions for, and exceptions to, a shareholder being eligible to choose scrip for scrip roll-over. The main requirements as relevant to the combination are: 45. This Ruling has taken into account the amendments made to Subdivision 124-M by the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Act 2015 which received Royal Assent on 13 October 2015. Schedule 1 to the Act applies to CGT events happening after 7:30pm (by legal time in the Australian Capital Territory) on 8 May 2012.

Ruling: CGT event A1: 21. CGT event A1 happened when Shareholders disposed of their BG Shares in exchange for the Combination consideration alternatives (section 104-10). 22. The time when CGT event A1 happened to the BG Shares was the date on which the Combination occurred via the Court Sanction (11 February 2016) (paragraph 104-10(3)(b)). 23. A Shareholder made a capital gain when CGT event A1 happened to the BG Shares if the capital proceeds from the disposal of a BG Share exceeded the cost base of that share. The capital gain is the amount of the excess (subsection 104-10(4)). 24. A Shareholder made a capital loss when CGT event A1 happened to the BG Shares if the capital proceeds from the disposal of a BG Share were less than the reduced cost base of that share. The capital loss is the amount of the difference (subsection 104-10(4)). 25. The capital proceeds from CGT event A1 happening to a BG Share is the: 26. The market value of the Combination consideration alternatives received is worked out as at the time of CGT event A1, which is on the Court Sanction Date (11 February 2016) (subsection 116-20(1)). | Availability of partial scrip for scrip roll-over if a capital gain is made: 27. Subject to the qualification in paragraph 28, a Shareholder who made a capital gain from the disposal of their BG Shares may choose to obtain partial scrip for scrip roll-over for that part of the capital gain that is referable only to the receipt of the Shell Shares. See paragraphs 33-36 below where some or all of the proceeds received in exchange for BG Shares was cash. 28. Scrip for scrip roll-over cannot be chosen if, should the shareholder make another capital gain upon a subsequent CGT event happening to the replacement Shell Shares, that capital gain would be disregarded, except because of a roll-over (paragraph 124-795(2)(a)). For example, where the replacement Shell Shares are held as trading stock. | Capital gain is partially disregarded: 29. If a Shareholder chooses scrip for scrip roll-over, the part of the capital gain that is referable to the receipt of Shell Shares is disregarded (subsections 124-785(1) and 124-790(1)). See paragraphs 33-36 below where some or all of the proceeds received in exchange for BG Shares was cash. | Acquisition date of the new Shell Shares: 30. If a Shareholder chooses scrip for scrip roll-over, the acquisition date of the new Shell Shares for the purposes of entitlement to a discount capital gain should a subsequent CGT event happen to the Shell Shares (such as a disposal of the Shell Shares) is the date when the shareholder acquired the BG Shares that were exchanged for the new Shell Shares (item 2 of the table in subsection 115-30(1)). 31. Where a BG employee was subject to a 'deferred taxing point' prior to, or as a result of the Combination, any period where the interests in BG Shares were held as BG Rights is not taken into account in determining when the employees acquired their BG Shares (and therefore are not taken into account in determining when the employees acquired their Shell Shares). | Cost base and reduced cost base of new Shell Shares received: 32. If a Shareholder chooses scrip for scrip roll-over, the first element of the cost base and reduced cost base of replacement new Shell Shares received (in exchange for their BG Shares) is worked out by reasonably attributing the cost base and reduced cost base (respectively) of the BG Shares which were exchanged and for which the roll-over was obtained (subsections 124-785(2) and 124-785(4)). The cost base and reduced cost base of the BG Shares exchanged by a shareholder is reduced by so much of it that is referable to the receipt of cash (subsection 124-785(3)). | Cash component: 33. To the extent a BG Shareholder received cash in exchange for their BG Shares, no CGT roll-over is available. 34. Where a BG Shareholder received: the BG Shareholder may choose partial CGT scrip-for-scrip roll-over for the Shell Shares received (the cost base and reduced cost base outcomes for the Shell Shares received are set out in paragraph 32). Where the shareholder makes the choice, then for the cash received in exchange for the BG Shares, the shareholder makes: 35. Where a Shareholder received consideration in foreign cash (such as GBP3.83 per BG Share where the Default Consideration was received), the Australian dollar value of any cash received must be worked out on the Court Sanction Date (11 February 2016). 36. The relevant portion of the cost base or reduced cost base of BG shares which are exchanged for Shell Shares and cash is the amount that is reasonably attributable to each respectively (subsection 124-790(2)). | Capital gain is not disregarded: 37. A Shareholder who does not choose scrip for scrip roll-over, or cannot choose the roll-over, must take into account any capital gain or capital loss made as a result of CGT event A1 happening on the disposal of their BG Shares in working out their net capital gains, or for determining any current or carried forward capital losses for the income year in which CGT event A1 happens (sections 102-5 and 102-10). 38. A Shareholder, who makes a capital gain where scrip for scrip roll-over is not chosen, or cannot be chosen, is entitled to treat the capital gain as a 'discount capital gain' provided that the conditions of Subdivision 115-A are met. In particular, the BG Shares were acquired, or taken to have been acquired, by the shareholder at least 12 months before the Court Sanction Date (11 February 2016). Where a subsequent CGT event happened to the Shell Shares such as a later disposal of the shares, the period when the Shell Shareholder previously held BG Shares is not taken into account. | Acquisition date of the new Shell Shares: 39. A Shareholder who does not choose scrip for scrip roll-over, or cannot choose the roll-over, acquired their new Shell Shares on the Court Sanction Date (11 February 2016) (item 2 of the table in section 109-10). | Cost base and reduced cost base of new Shell Shares: 40. If a Shareholder does not choose scrip for scrip roll-over, or cannot choose the roll-over, the first element of the cost base and reduced cost base of the replacement new Shell Shares received is equal to the market value of the BG Shares given in respect of acquiring the new Shell Shares (subsections 110-25(2) and 110-55(2)). The market value of the BG Shares given is worked out on the Court Sanction Date (11 February 2016). The cost base or reduced cost base of new Shell Shares received does not include any portion of the market value of the BG Shares that was given in exchange for the cash consideration received (subsection 112-30(1)). Commissioner of Taxation 12 October 2016


Appendix: Availability of scrip for scrip roll-over if a capital gain is made: 41. The tax consequences that arise concerning the scheme that is the subject of this Ruling are outlined in the Ruling part of this document. 42. The main tax consequences for Australian shareholders that are the subject of this Ruling are: 43. The roll-over enables a shareholder to disregard any part of the capital gain from a share that is disposed of if the shareholder receives a replacement share in exchange. Any part of the capital gain that is referable to the receipt of cash is not disregarded because it is ineligible proceeds for which the roll-over is not available. It also provides special rules for calculating the cost base and reduced cost base of the replacement share. 44. Subdivision 124-M contains a number of conditions for, and exceptions to, a shareholder being eligible to choose scrip for scrip roll-over. The main requirements as relevant to the combination are: 45. This Ruling has taken into account the amendments made to Subdivision 124-M by the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Act 2015 which received Royal Assent on 13 October 2015. Schedule 1 to the Act applies to CGT events happening after 7:30pm (by legal time in the Australian Capital Territory) on 8 May 2012. | Example: 46. Mr Jones, an Australian resident, acquired 1,000 BG Group plc (BG) Shares on 1 July 2012 for $18,000. On the Court Sanction Date (11 February 2016), Mr Jones received the Default Consideration of GBP3.83 in cash and 0.4454 Shell B Shares per BG Share. Mr Jones received cash of $7,271.88 after his bank deducted a foreign currency transaction fee of $250. The market value of Shell B Shares on the Court Sanction date was GBP14.455 per share. The market value of BG Shares on the Court Sanction date was GBP10.20 per share. The market value of Shell B Shares on the Combination Date (15 February 2016) was GBP15.405 per share. 47. The Commissioner's published foreign exchange rate on the Court Sanction Date was GBP0.5100:$1. 48. Therefore, Mr Jones received: | Consequences if Mr Jones chooses scrip for scrip roll-over: 49. If Mr Jones chooses scrip for scrip roll-over, then Mr Jones: | Consequences if Mr Jones does not or cannot choose scrip for scrip roll-over: 50. If Mr Jones does not or cannot choose scrip for scrip roll-over, then Mr Jones:


What this Ruling is about | NOT LEGALLY BINDING SECTION: | Appendix 2: Detailed contents list | 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: 51. The following is a detailed contents list for this Ruling: | Consequences if scrip for scrip roll-over is chosen | Consequences if scrip for scrip roll-over is not chosen, or cannot be chosen | Not previously issued as a draft


Related rulings: TR 2006/10 CR 2016/59
Legislative references: ITAA 1936 ITAA 1936 6(1) ITAA 1997 ITAA 1997 102-5 ITAA 1997 102-10 ITAA 1997 104-10 ITAA 1997 104-10(3)(b) ITAA 1997 104-10(4) ITAA 1997 109-10 ITAA 1997 109-50 ITAA 1997 109-55 ITAA 1997 110-25 ITAA 1997 110-25(2) ITAA 1997 110-55(2) ITAA 1997 112-30(1) ITAA 1997 Subdiv 115-A ITAA 1997 Subdiv 115-C ITAA 1997 115-30(1) ITAA 1997 116-20 ITAA 1997 116-20(1) ITAA 1997 Subdiv 124-M ITAA 1997 124-780 ITAA 1997 124-780 ITAA 1997 124-780(1) ITAA 1997 124-780(1)(a)(i) ITAA 1997 124-780(1)(b) ITAA 1997 124-780(2A) ITAA 1997 124-780(2)(a) ITAA 1997 124-780(2A) ITAA 1997 124-780(2A)(a) ITAA 1997 124-780(2A)(b) ITAA 1997 124-780(3) ITAA 1997 124-780(3)(a) ITAA 1997 124-780(3)(b) ITAA 1997 124-780(3)(c) ITAA 1997 124-780(3)(C)(ii) ITAA 1997 124-780(3)(d) ITAA 1997 124-780(3)(e) ITAA 1997 124-780(3)(f) ITAA 1997 124-780(4) ITAA 1997 124-780(5) ITAA 1997 124-780(6) ITAA 1997 124-782 ITAA 1997 124-783 ITAA 1997 124-785 ITAA 1997 124-785(1) ITAA 1997 124-785(2) ITAA 1997 124-785(3) ITAA 1997 124-785(4) ITAA 1997 124-790 ITAA 1997 124-790(1) ITAA 1997 124-790(2) ITAA 1997 124-795 ITAA 1997 124-795(2)(a) ITAA 1997 124-795(2)(b) ITAA 1997 124-795(3) ITAA 1997 124-795(4) ITAA 1997 Div 230 ITAA 1997 855-10(1) ITAA 1997 855-15 ITAA 1997 995-1(1) TAA 1953 Tax and Superannuation Laws Amendment (2015 Measures No. 4) Act 2015