Class Ruling CR 2021/38

What this ruling is about: 1. This Ruling sets out the tax consequences for shareholders of Saracen Mineral Holdings Limited (Saracen) who sold their Saracen shares pursuant to the scheme of arrangement which was announced on 6 October 2020 (Scheme of Arrangement). 2. Full details of this Scheme of Arrangement and the special dividend paid by Saracen on 11 February 2021 (Special Dividend) are set out in paragraphs 40 to 63 of this Ruling. 3. All legislative references in this Ruling are to provisions of the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 (as detailed in the table in Appendix 2 of this Ruling) unless otherwise indicated. Who this Ruling applies to 4. This Ruling applies to you if you: 5. This Ruling does not apply to you if you: Note: Division 230 will not apply to individuals, unless they have made an election for it to apply. When this Ruling applies 6. This Ruling applies from 1 July 2020 to 30 June 2021. Special Dividend 7. The Special Dividend is a 'dividend' as defined in subsection 6(1). 8. The Special Dividend is a frankable distribution under section 202-40. Assessability of the Special Dividend, franking credits and tax offsets Resident shareholders 9. If you are a resident of Australia as defined in subsection 6(1), you include the Special Dividend in your assessable income (paragraph 44(1)(a)). 10. If you satisfy the residency requirements in section 207-75, you include the franking credits attached to the Special Dividend in your assessable income and you are entitled to a tax offset equal to the amount of those credits (section 207-20), provided you are a 'qualified person' (as defined in Division 1A of former Part IIIAA). 11. If you received the Special Dividend as a trustee of a trust (not being a complying superannuation entity) or as a partnership and you are not a corporate tax entity, the franking credits attached to the Special Dividend are included in your assessable income, provided you are a qualified person (subsection 207-35(1)). 12. If you are a partner in a partnership or a beneficiary of a trust and the Special Dividend flows indirectly through the partnership or trust to you, you include your share of the Special Dividend in your assessable income and you are entitled to a tax offset equal to your share of the franking credit attached to the Special Dividend, provided both you and the partnership or trust, as is relevant, are each a qualified person (section 207-45 and former subsection 160APHU(1)). 13. The tax offset is refundable, subject to the refundable tax offset rules in Division 67. Non-resident shareholders Special Dividend attributable to a permanent establishment in Australia 14. If you are a non-resident and the Special Dividend is attributable to a permanent establishment in Australia, you include the Special Dividend in your assessable income (paragraphs 44(1)(b) and (c)) and you are not liable to pay withholding tax in respect of the Special Dividend (subsection 128B(3E)). 15. If you are also a qualified person (as defined in Division 1A of former Part IIIAA), you include the amount of the franking credits attached to the Special Dividend in your assessable income and you are entitled to a tax offset equal to the amount of those credits (section 207-20 and subsection 207-75(2)). The tax offset is not refundable (subsection 67-25(1DA)). Special Dividend not attributable to a permanent establishment in Australia 16. If you are a non-resident and the Special Dividend is not attributable to a permanent establishment in Australia, the Special Dividend is not included in your assessable income (section 128D) and you are not liable to withholding tax in respect of the Special Dividend (paragraph 128B(3)(ga)). 17. You do not include the amount of the franking credits attached to the Special Dividend in your assessable income and you are not entitled to a tax offset for those franking credits (sections 207-20 and 207-70). Qualified persons 18. The Special Dividend you received does not constitute a 'related payment' for the purposes of former section 160APHN. 19. You will be a qualified person in relation to the Special Dividend if, during the period from when you acquired your Saracen shares to 4 February 2021 (inclusive), you held your Saracen shares for a continuous period of at least 45 days during which you did not have 'materially diminished risks of loss or opportunities for gain' (as defined in former section 160APHM) in respect of the shares. Exempting entity 20. Saracen was not an exempting entity when the Special Dividend was paid to you, nor was it a former exempting entity at that time (Division 208). 21. Section 208-195 will not apply to exclude the application of Division 207. Capital gains tax consequences Resident shareholders CGT event A1 22. CGT event A1 happened to you on 12 February 2021 (Scheme Implementation Date) when you disposed of each of your Saracen shares to Northern Star in accordance with the Scheme of Arrangement (section 104-10). Capital proceeds 23. The capital proceeds from CGT event A1 happening to a Saracen share is the market value of 0.3763 shares in Northern Star you received in respect of the disposal of that Saracen share (subsection 116-20(1)). The market value of a share in Northern Star was worked out as at the time of CGT event A1, which was on the Scheme Implementation Date. 24. The capital proceeds do not include the Special Dividend. Capital gain or capital loss 25. You made a capital gain if the capital proceeds from the disposal of your Saracen share exceed its cost base (subsection 104-10(4)). The capital gain is the difference. 26. You made a capital loss if the capital proceeds from the disposal of your Saracen share are less than its reduced cost base (subsection 104-10(4)). The capital loss is the difference. Discount capital gain 27. If you made a capital gain from the disposal of your Saracen share, you are entitled to treat the capital gain as a 'discount capital gain' provided you acquired, or are taken to have acquired, your Saracen share on or before 12 February 2020 and the other conditions of Division 115 are satisfied (subsection 115-25(1)). Availability of scrip for scrip roll-over if a capital gain is made 28. Subject to paragraph 29 of this Ruling, if you made a capital gain from the disposal of your Saracen share, you may choose scrip for scrip roll-over (section 124-780). 29. Scrip for scrip roll-over cannot be chosen if any capital gain you might subsequently make from the replacement Northern Star shares would be disregarded on a subsequent CGT event, except because of a roll-over (paragraph 124-795(2)(a)). Consequences if scrip for scrip roll-over is chosen Capital gain is disregarded 30. If you choose scrip for scrip roll-over, the capital gain you made upon the exchange of a Saracen share for replacement Northern Star shares is disregarded (subsection 124-785(1)). Acquisition date of Northern Star Resources Ltd shares 31. If you choose scrip for scrip roll-over, the acquisition date of the Northern Star shares for the purpose of determining eligibility to make a discount capital gain is taken to be the date you acquired your original Saracen shares that were exchanged for the Northern Star shares (table item 2 of subsection 115-30(1)). Cost base / reduced cost base of Northern Star Resources Ltd shares received 32. If you choose scrip for scrip roll-over, the first element of the Cost base / reduced cost base of a replacement Northern Star share is worked out by reasonably attributing the Cost base / reduced cost base (respectively) of your original Saracen shares which were exchanged and for which the roll-over was obtained (subsections 124-785(2) and 124-785(4)). 33. You calculate the first element of the cost base or reduced cost base of each replacement Northern Star share by dividing the aggregate cost bases or reduced cost bases of your Saracen shares by the number of replacement Northern Star shares you received. Consequences if you do not, or cannot, choose scrip for scrip roll-over Capital gain is not disregarded 34. If you do not, or cannot, choose scrip for scrip roll-over, you must take into account any capital gain or capital loss from CGT event A1 happening on the disposal of your Saracen shares (sections 102-5 and 102-10). 35. If you made a capital gain where you do not, or cannot, choose scrip for scrip roll-over, you can treat the capital gain as a 'discount capital gain' provided that the conditions of Subdivision 115-A are met. Saracen shares must have been acquired, or taken to have been acquired, by you at least 12 months before the Scheme Implementation Date (section 115-25). Acquisition date of Northern Star Resources Ltd shares 36. Northern Star shares were acquired by you on the Scheme Implementation Date if you do not, or cannot, choose scrip for scrip roll-over (table item 2 of section 109-10). Cost base / reduced cost base of Northern Star Resources Ltd shares received 37. If you do not, or cannot, choose scrip for scrip roll-over, the first element of the Cost base / reduced cost base of each replacement Northern Star share received is equal to the market value of the part of the Saracen shares given in respect of acquiring each Northern Star share (subsections 110-25(2) and 110-55(2)). The market value of the Saracen shares is worked out as at the time of the acquisition of Northern Star shares on the Implementation Date. Non-resident shareholders 38. If you were a non-resident just before CGT event A1 happened to your Saracen shares on 12 February 2021, you disregard any capital gain or capital loss you made as a result of CGT event A1 happening as long as your Saracen shares were not taxable Australian property (section 855-10). Anti-avoidance provisions 39. The Commissioner will not make a determination under paragraphs 177EA(5)(b) or 204-30(3)(c) to deny the whole, or any part, of the imputation benefit you received in relation to the Special Dividend. 40. The following description of the scheme is based on information provided by Saracen. If the scheme is not carried out as described, this Ruling cannot be relied upon. 41. Other information referred to is the Scheme Implementation Deed released on the Australian Securities Exchange (ASX) on 6 October 2020, and the Scheme Booklet released on the ASX on 10 December 2020. Relevant entities Saracen Mineral Holdings Limited 42. Saracen is an Australian-resident company incorporated in 1987 and listed on the ASX since 1989. Saracen is a gold producer and is headquartered in Perth, Western Australia. 43. Saracen has a single-class share-capital structure consisting of ordinary shares. As at 30 November 2020, Saracen had 1,107,636,918 ordinary shares on issue. 44. Saracen shareholders included both residents and non-residents. At no time since incorporation did non-resident Saracen shareholders own 95% or more of the shares in Saracen. 45. Saracen has not previously paid dividends. Northern Star Resources Ltd 46. Northern Star is an Australian-incorporated ASX-listed company. It is a gold producer and is headquartered in Subiaco, Western Australia. 47. Northern Star has previously paid fully franked dividends.

Class of entities or scheme: 48. On 6 October 2020, Saracen announced it had entered into a Scheme Implementation Deed with Northern Star. Northern Star proposed to acquire all the issued shares of Saracen by way of a scheme of arrangement under Part 5.1 of the Corporations Act 2001 by issuing 0.3763 fully-paid Northern Star ordinary shares for each Saracen share. 49. Under the Scheme of Arrangement, each person registered as a holder of Saracen shares on the Scheme Record Date (a scheme shareholder) was entitled to participate in the Scheme of Arrangement. 50. Scheme shareholders agreed to transfer their Saracen shares to Northern Star in return for receiving the Scheme Consideration on the Scheme Implementation Date. The Scheme Consideration per Saracen share was 0.3763 fully-paid Northern Star ordinary shares. 51. Saracen shares were removed from official quotation on the ASX on 15 February 2021 and Saracen was renamed as Northern Star (Saracen) Pty Ltd. | Special Dividend: 52. On 1 February 2021, Saracen declared a Special Dividend of 3.8 cents per share which was fully franked and payable to Saracen shareholders who held their shares at 7:00pm (AEDT) 3 February 2021 (Special Dividend Record Date). 53. Saracen paid the Special Dividend on 11 February 2021. 54. The Special Dividend was subject to the Scheme of Arrangement becoming effective. The Scheme of Arrangement was not conditional on Northern Star or a third-party financing or facilitating payment of the Special Dividend, or Northern Star or a third party being obliged to bring about the result that the Special Dividend would be received by Saracen shareholders. 55. The Special Dividend was declared and paid by Saracen in its absolute discretion. Neither Saracen nor any of its associates had any influence or control over the declaration and payment of the Special Dividend. 56. The Special Dividend complied with the requirements of the Corporations Act 2001, including section 254T of that Act. The Special Dividend was entirely debited against Saracen's retained earnings and not against an amount standing to the credit of Saracen's share capital account. It was funded from Saracen's existing cash reserves. | Other matters: 57. All Saracen shareholders were offered the opportunity to participate in the Scheme of Arrangement, and the Scheme of Arrangement was available to all Saracen shareholders on the same terms. 58. All dealings between Saracen shareholders and Northern Star were at arm's length. 59. Saracen did not have a 'significant stakeholder' or a 'common stakeholder' in relation to the Scheme of Arrangement within the meaning of those expressions in section 124-783. 60. Paragraph 124-780(3)(f) is satisfied in respect of the sale of Saracen shares to Northern Star. 61. Northern Star will not make the choice that Saracen shareholders could not obtain Subdivision 124-M roll-over for CGT event A1 happening in relation to the exchange of Saracen shares for the purposes of subsection 124-795(4). 62. The aggregate market value of Saracen's taxable Australian property assets exceed the aggregate market value of Saracen's non-taxable Australian property assets. | Key dates: 63. The following is a summary of the key dates for the Scheme of Arrangement: Commissioner of Taxation 26 May 2021 | Special Dividend: 64. The term 'dividend' is defined in subsection 6(1) to include any distribution of money made by a company to any of its shareholders which is not debited against an amount standing to the credit of the company's share capital account. 65. The Special Dividend is a distribution that was not debited against an amount standing to the credit of Saracen's share capital account. Accordingly, the Special Dividend is a dividend for the purposes of subsection 6(1). | Resident shareholders: 66. The assessable income of a resident shareholder includes dividends paid by the company out of profits derived by it from any source (subparagraph 44(1)(a)(i)). 67. If you are a resident shareholder, the Special Dividend you received is included in your assessable income as it was paid out of profits derived by Saracen. | Non-resident shareholders: Special Dividend attributable to a permanent establishment in Australia 68. If you are a non-resident and the Special Dividend is attributable to a permanent establishment in Australia at or through which you carry on business (and is not paid to you in your capacity as trustee), the Special Dividend you received is included in your assessable income (subparagraph 44(1)(b)(i)) and is not subject to withholding tax (subsection 128B(3E)). Special Dividend not attributable to a permanent establishment in Australia 69. The assessable income of a non-resident shareholder generally includes dividends to the extent to which they are paid out of profits derived by the company from sources in Australia unless another provision excludes it from the shareholder's assessable income (subparagraph 44(1)(b)(i) and subsection 44(1)). 70. However, if you are a non-resident and the Special Dividend is not attributable to a permanent establishment in Australia at or through which you carry on business, the Special Dividend is not included in your assessable income (section 128D) and is not subject to withholding tax (paragraph 128B(3)(ga)). | Special Dividend can be franked: 71. A distribution is a frankable distribution to the extent it is not unfrankable (section 202-40). Section 202-45 sets out the circumstances under which an amount or distribution is taken to be unfrankable. 72. The Special Dividend is a frankable distribution as none of the circumstances listed in section 202-45 apply to the Special Dividend. | Gross-up and tax offset: 73. If you are a qualified person in relation to the Special Dividend, your assessable income includes the amount of the franking credit (subsection 207-20(1)) and you will be entitled to a tax offset equal to the franking credit on the distribution (subsection 207-20(2)). This applies to both resident shareholders and non-resident shareholders that carry on business in Australia at or through a permanent establishment in Australia (where the dividend is attributable to the permanent establishment). 74. The assessable income of a partnership or trustee of a trust (that is not an entity taxed as a corporate tax entity, and if a trustee, that is not a complying superannuation fund) which satisfies the qualified person rule, includes the amount of the franking credit attached to the Special Dividend (subsection 207-35(1)). 75. Where you are not a qualified person in relation to the Special Dividend, you do not include the franking credit attached to the Special Dividend in your assessable income (paragraph 207-145(1)(e)) and you are not entitled to a tax offset equal to the amount of the franking credit attached to the Special Dividend (paragraph 207-145(1)(f)). | Qualified person: 76. An entity must be a qualified person in relation to the dividend in order to be entitled to a tax offset in respect of the franking credit on the dividend (subsection 207-145(1), noting paragraph 207-145(1)(a) refers to former Division 1A of Part IIIAA). 77. The test of what constitutes a qualified person is provided in former subsection 160APHO(1). Broadly, if you were not under an obligation to make a related payment in relation to the dividend, you will have to satisfy the holding period rule in relation to the primary qualification period. If you were under an obligation to make a related payment in relation to the dividend, you will have to satisfy the holding period requirement within the secondary qualification period. 78. A partner in a partnership or the beneficiary of a trust cannot be a qualified person in relation to their share of the dividend unless the partnership or the trustee of the trust is also a qualified person in relation to the dividend (former section 160APHU). Related payment rule 79. Former section 160APHN sets out examples of what constitutes the making of a related payment. Broadly, a shareholder is taken to have made or to be under an obligation to make a related payment in respect of the dividend if the shareholder has done, or is under an obligation to do, anything which has the effect of passing the benefit of the dividend to one or more other persons. 80. As the Scheme Consideration was not affected by the Special Dividend, the Commissioner considers that scheme shareholders were not under an obligation to make a related payment in relation to the Special Dividend. Primary qualification period 81. The primary qualification period is the period beginning on the day after the day on which the shareholder acquired the shares and ending 45 days after the day on which a share became ex dividend (former section 160APHD). 82. Under former subsection 160APHE(1), a share becomes ex dividend on the day after the last day on which the acquisition by a person of the share entitles them to receive the dividend. The last day on which the acquisition by a person of a Saracen share entitled the person to receive the Special Dividend was the record date for the Special Dividend of 3 February 2021. It follows that Saracen shares became ex dividend on 4 February 2021. Holding period rule 83. If you are an individual who has franking credit offsets not exceeding $5,000 for the income year ending 30 June 2021, you do not need to satisfy the holding period rule in relation to the Special Dividend (former subsection 160APHT(1)). 84. For all other shareholders, the holding period rule requires you to hold your ordinary shares at risk for a continuous period of not less than 45 days (not including the day on which the share was acquired, or the day on which the share was disposed of) during the relevant qualification period (former paragraph 160APHO(2)(a)). 85. Any days you had a materially diminished risks of loss or opportunities for gain in respect of the shares are excluded (former subsection 160APHO(3)). 86. Under former subsection 160APHM(2), you are taken to have materially diminished risks of loss and opportunities for gain on a particular day with respect to your Saracen shares if your net position on that day in relation to the shares has less than 30% of those risks and opportunities. 87. Under the Scheme of Arrangement, you no longer held your Saracen shares at risk on the Scheme Record Date (when you became committed to dispose of your Saracen shares to Northern Star under the Scheme of Arrangement). 88. Accordingly, if you acquired your Saracen shares on or before 21 December 2020 and disposed of them to Northern Star under the Scheme of Arrangement, you satisfied the holding period rule if you held those shares at risk for at least 45 continuous days during the period from when you acquired your Saracen shares to 4 February 2021. | Refundable tax offset: 89. Your entitlement to the tax offsets under Division 207 in relation to the Special Dividend is subject to the refundable tax offset rules in Division 67, provided you are not excluded by the operation of section 67-25. 90. You are specifically excluded from the operation of the refundable tax offset rules pursuant to section 67-25 if you are a: 91. Division 63 sets out the rules on how, and in what order, tax offsets are applied against an income tax liability. Where a tax offset that is subject to the refundable tax offset rules in Division 67 exceeds your income tax liability, you are entitled a refund of the difference (table item 40 of section 63-10). | Exempting entity: 92. Saracen was not an exempting entity or a former exempting entity at the time when the Special Dividend was paid to you. Therefore, section 208-195 does not apply to deny the gross-up of your assessable income by the amount of the franking credit attached to the Special Dividend you received, nor deny the tax offset to which you are otherwise entitled pursuant to Division 207 at the time when the Special Dividend was paid. | CGT event A1: 93. CGT event A1 happens if there is a change in the ownership of a CGT asset (section 104-10). The event happens when a contract to dispose of the asset is entered into or, if there is no contract, when the change of ownership occurs (subsection 104-10(3)). 94. The disposal of Saracen shares under a court approved Scheme of Arrangement results in a disposal of shares, but not under a contract. Therefore, CGT event A1 happened on the Scheme Implementation Date when there was a change of ownership in a Saracen share from you to Northern Star under the Scheme of Arrangement (subsections 104-10(1) and (2) and paragraph 104-10(3)(b)). 95. The time when CGT event A1 happens determines the income year in which you make a capital gain or capital loss and whether you are entitled to the CGT discount for any capital gain you made. | Capital proceeds: 96. The capital proceeds you receive from a CGT event is the amount of money and the market value of any property you received or are entitled to receive (worked out at the time the event happened) in respect of the event happening (subsection 116-20(1)). 97. The term 'in respect of the event happening' in subsection 116-20(1) requires the relationship between the event and the receipt of the money, or the entitlement to receive the money, to be more than coincidental. An amount is not capital proceeds received or entitled to be received in respect of a CGT event merely because it is received in association with the CGT event. [1] 98. The Scheme of Arrangement was not conditional on declaration of the Special Dividend, Northern Star or a third party financing or facilitating payment of the Special Dividend, or Northern Star or a third party being obliged to bring about the result that the Special Dividend would be paid to exiting shareholders. 99. The Commissioner considers that the Special Dividend was not received in respect of the disposal of Saracen shares under the Scheme of Arrangement, having regard to all of the relevant circumstances. Accordingly, the Special Dividend does not form part of the capital proceeds in respect of CGT event A1 happening. 100. Therefore, the capital proceeds you received from CGT event A1 happening on disposal of each Saracen share is the Scheme Consideration of 0.3763 shares in Northern Star you received. | Capital gain or capital loss: 101. You made a capital gain if the capital proceeds from the disposal of your Saracen share exceed its cost base (subsection 104-10(4)). The capital gain is the difference. 102. You made a capital loss if the capital proceeds from the disposal of your Saracen share are less than its reduced cost base (subsection 104-10(4)). The capital loss is the difference. 103. The Cost base / reduced cost base of each Saracen share depends on your individual circumstances. | Discount capital gain: 104. If you make a capital gain from the disposal of your Saracen share, you are eligible to treat the capital gain as a discount capital gain provided that: | Non-resident shareholders: 105. You disregard a capital gain or capital loss from a CGT event if you are a non-resident, or the trustee of a non-resident trust for CGT purposes, just before the CGT event happens and the CGT event happens in relation to a CGT asset that is not taxable Australian property (subsection 855-10(1)). 106. The term 'taxable Australian property' is defined in the table in section 855-15. Where you are a non-resident or a trustee of a non-resident trust for CGT purposes just before CGT event A1 happened to your Saracen shares under the Scheme of Arrangement, you cannot disregard a capital gain or capital loss from CGT event A1 happening (under subsection 855-10(1)) if, relevantly, your Saracen shares were: 107. Section 855-25 provides that a membership interest (that is, shares) held by an entity (that is, foreign-resident Saracen shareholder) in another entity (that is, Saracen) is an indirect Australian real property interest if the interest passes the: 108. The non-portfolio test requires that a foreign-resident shareholder, and their associates, together hold 10% or more of the issued shares in an entity at the time the shares are disposed or for at least 12 months during the 24 months prior to disposal of the shares. 109. The principal asset test requires that the sum of the market values of the entity's (that is, Saracen) assets that are taxable Australian real property exceeds the sum of the market values of the entity's assets that are not taxable Australian real property. 110. The aggregate market value of Saracen's taxable Australian property assets exceed the aggregate market value of Saracen's non-taxable Australian property assets. 111. Accordingly, if you are a non-resident, or the trustee of a non-resident trust for CGT purposes that holds, together with your associates, a 10% or more interest in Saracen Shares (at the time of disposal or for at least 12 months during the 24 months prior to disposal of their Saracen Shares) you will not disregard a capital gain or capital loss from a CGT event happening to your Saracen shares with respect to the scheme. | Availability of scrip for scrip roll-over if capital gain is made: 112. The tax consequences that arise concerning the scheme that is the subject of this Ruling are outlined in paragraphs 7 to 39 of this Ruling. 113. One consequence identified in this Ruling is the availability of scrip for scrip roll-over under Subdivision 124-M. The roll-over enables a shareholder to disregard a capital gain from a share that is disposed of if the shareholder receives a replacement share in exchange. It also provides special rules for calculating the Cost base / reduced cost base of the replacement share. 114. 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 that are relevant to the scheme that is subject to this Ruling are: 115. The scheme that is the subject of this Ruling satisfies the requirements for roll-over under Subdivision 124-M. | Section 177EA: 116. Section 177EA is a general anti-avoidance provision that applies where one of the purposes (other than an incidental purpose) of a particular scheme is to enable a taxpayer to obtain an imputation benefit. 117. Saracen shareholders have different tax and residency profiles. The fully franked Special Dividend was paid to all existing shareholders of Saracen in proportion to the number of shares that each shareholder held on the Record Date and irrespective of their ability to use the relevant franking credits. The Special Dividend allowed Saracen shareholders to share in the accumulated profits of Saracen. 118. It is considered that the conditions for applying section 177EA are not satisfied in relation to the payment of the Special Dividend. Therefore, the Commissioner will not make a determination under paragraph 177EA(5)(b) to deny the whole, or part, of the imputation benefits received in relation to the Special Dividend. | Section 204-30: 119. Section 204-30 applies where a corporate tax entity streams the payment of dividends to its members in such a way that certain shareholders (referred to as 'favoured members') obtain imputation benefits, and other shareholders (referred to as 'disadvantaged members') obtain lesser or no imputation benefits, whether or not they receive other benefits. The favoured members are those that derive a greater benefit from imputation benefits than disadvantaged members. 120. For section 204-30 to apply, members to whom distributions are streamed must derive a greater benefit from franking credits than another member entity The words 'derive a greater benefit from franking credits' are defined in subsection 204-30(8) by reference to the ability of the members to fully use imputation benefits. 121. Under the Scheme of Arrangement, you received an imputation benefit when the Special Dividend was paid. The Special Dividend was paid equally to all Saracen shareholders and was fully franked regardless of your tax profile. Accordingly, it cannot be said that Saracen selectively directed the flow of franked dividends to those members who obtained the most benefit from the franking credits. 122. As the conditions in subsection 204-30(1) were not met, the Commissioner will not make a determination under paragraph 204-30(3)(c) to deny the whole, or any part, of the imputation benefits received by you in relation to the Special Dividend. 123. This paragraph sets out the details of the provisions ruled upon or referenced in 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). Not previously issued as a draft

Ruling: 1. This Ruling sets out the tax consequences for shareholders of Saracen Mineral Holdings Limited (Saracen) who sold their Saracen shares pursuant to the scheme of arrangement which was announced on 6 October 2020 (Scheme of Arrangement). 2. Full details of this Scheme of Arrangement and the special dividend paid by Saracen on 11 February 2021 (Special Dividend) are set out in paragraphs 40 to 63 of this Ruling. 3. All legislative references in this Ruling are to provisions of the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 (as detailed in the table in Appendix 2 of this Ruling) unless otherwise indicated. | Who this Ruling applies to: 4. This Ruling applies to you if you: 5. This Ruling does not apply to you if you: Note: Division 230 will not apply to individuals, unless they have made an election for it to apply. | When this Ruling applies: 6. This Ruling applies from 1 July 2020 to 30 June 2021. | Special Dividend: 7. The Special Dividend is a 'dividend' as defined in subsection 6(1). 8. The Special Dividend is a frankable distribution under section 202-40. | Resident shareholders: 9. If you are a resident of Australia as defined in subsection 6(1), you include the Special Dividend in your assessable income (paragraph 44(1)(a)). 10. If you satisfy the residency requirements in section 207-75, you include the franking credits attached to the Special Dividend in your assessable income and you are entitled to a tax offset equal to the amount of those credits (section 207-20), provided you are a 'qualified person' (as defined in Division 1A of former Part IIIAA). 11. If you received the Special Dividend as a trustee of a trust (not being a complying superannuation entity) or as a partnership and you are not a corporate tax entity, the franking credits attached to the Special Dividend are included in your assessable income, provided you are a qualified person (subsection 207-35(1)). 12. If you are a partner in a partnership or a beneficiary of a trust and the Special Dividend flows indirectly through the partnership or trust to you, you include your share of the Special Dividend in your assessable income and you are entitled to a tax offset equal to your share of the franking credit attached to the Special Dividend, provided both you and the partnership or trust, as is relevant, are each a qualified person (section 207-45 and former subsection 160APHU(1)). 13. The tax offset is refundable, subject to the refundable tax offset rules in Division 67. | Non-resident shareholders: Special Dividend attributable to a permanent establishment in Australia 14. If you are a non-resident and the Special Dividend is attributable to a permanent establishment in Australia, you include the Special Dividend in your assessable income (paragraphs 44(1)(b) and (c)) and you are not liable to pay withholding tax in respect of the Special Dividend (subsection 128B(3E)). 15. If you are also a qualified person (as defined in Division 1A of former Part IIIAA), you include the amount of the franking credits attached to the Special Dividend in your assessable income and you are entitled to a tax offset equal to the amount of those credits (section 207-20 and subsection 207-75(2)). The tax offset is not refundable (subsection 67-25(1DA)). Special Dividend not attributable to a permanent establishment in Australia 16. If you are a non-resident and the Special Dividend is not attributable to a permanent establishment in Australia, the Special Dividend is not included in your assessable income (section 128D) and you are not liable to withholding tax in respect of the Special Dividend (paragraph 128B(3)(ga)). 17. You do not include the amount of the franking credits attached to the Special Dividend in your assessable income and you are not entitled to a tax offset for those franking credits (sections 207-20 and 207-70). | Qualified persons: 18. The Special Dividend you received does not constitute a 'related payment' for the purposes of former section 160APHN. 19. You will be a qualified person in relation to the Special Dividend if, during the period from when you acquired your Saracen shares to 4 February 2021 (inclusive), you held your Saracen shares for a continuous period of at least 45 days during which you did not have 'materially diminished risks of loss or opportunities for gain' (as defined in former section 160APHM) in respect of the shares. | Exempting entity: 20. Saracen was not an exempting entity when the Special Dividend was paid to you, nor was it a former exempting entity at that time (Division 208). 21. Section 208-195 will not apply to exclude the application of Division 207. | Resident shareholders: CGT event A1 22. CGT event A1 happened to you on 12 February 2021 (Scheme Implementation Date) when you disposed of each of your Saracen shares to Northern Star in accordance with the Scheme of Arrangement (section 104-10). Capital proceeds 23. The capital proceeds from CGT event A1 happening to a Saracen share is the market value of 0.3763 shares in Northern Star you received in respect of the disposal of that Saracen share (subsection 116-20(1)). The market value of a share in Northern Star was worked out as at the time of CGT event A1, which was on the Scheme Implementation Date. 24. The capital proceeds do not include the Special Dividend. Capital gain or capital loss 25. You made a capital gain if the capital proceeds from the disposal of your Saracen share exceed its cost base (subsection 104-10(4)). The capital gain is the difference. 26. You made a capital loss if the capital proceeds from the disposal of your Saracen share are less than its reduced cost base (subsection 104-10(4)). The capital loss is the difference. Discount capital gain 27. If you made a capital gain from the disposal of your Saracen share, you are entitled to treat the capital gain as a 'discount capital gain' provided you acquired, or are taken to have acquired, your Saracen share on or before 12 February 2020 and the other conditions of Division 115 are satisfied (subsection 115-25(1)). | Availability of scrip for scrip roll-over if a capital gain is made: 28. Subject to paragraph 29 of this Ruling, if you made a capital gain from the disposal of your Saracen share, you may choose scrip for scrip roll-over (section 124-780). 29. Scrip for scrip roll-over cannot be chosen if any capital gain you might subsequently make from the replacement Northern Star shares would be disregarded on a subsequent CGT event, except because of a roll-over (paragraph 124-795(2)(a)). | Consequences if scrip for scrip roll-over is chosen: Capital gain is disregarded 30. If you choose scrip for scrip roll-over, the capital gain you made upon the exchange of a Saracen share for replacement Northern Star shares is disregarded (subsection 124-785(1)). Acquisition date of Northern Star Resources Ltd shares 31. If you choose scrip for scrip roll-over, the acquisition date of the Northern Star shares for the purpose of determining eligibility to make a discount capital gain is taken to be the date you acquired your original Saracen shares that were exchanged for the Northern Star shares (table item 2 of subsection 115-30(1)). Cost base / reduced cost base of Northern Star Resources Ltd shares received 32. If you choose scrip for scrip roll-over, the first element of the Cost base / reduced cost base of a replacement Northern Star share is worked out by reasonably attributing the Cost base / reduced cost base (respectively) of your original Saracen shares which were exchanged and for which the roll-over was obtained (subsections 124-785(2) and 124-785(4)). 33. You calculate the first element of the cost base or reduced cost base of each replacement Northern Star share by dividing the aggregate cost bases or reduced cost bases of your Saracen shares by the number of replacement Northern Star shares you received. | Consequences if you do not, or cannot, choose scrip for scrip roll-over: Capital gain is not disregarded 34. If you do not, or cannot, choose scrip for scrip roll-over, you must take into account any capital gain or capital loss from CGT event A1 happening on the disposal of your Saracen shares (sections 102-5 and 102-10). 35. If you made a capital gain where you do not, or cannot, choose scrip for scrip roll-over, you can treat the capital gain as a 'discount capital gain' provided that the conditions of Subdivision 115-A are met. Saracen shares must have been acquired, or taken to have been acquired, by you at least 12 months before the Scheme Implementation Date (section 115-25). Acquisition date of Northern Star Resources Ltd shares 36. Northern Star shares were acquired by you on the Scheme Implementation Date if you do not, or cannot, choose scrip for scrip roll-over (table item 2 of section 109-10). Cost base / reduced cost base of Northern Star Resources Ltd shares received 37. If you do not, or cannot, choose scrip for scrip roll-over, the first element of the Cost base / reduced cost base of each replacement Northern Star share received is equal to the market value of the part of the Saracen shares given in respect of acquiring each Northern Star share (subsections 110-25(2) and 110-55(2)). The market value of the Saracen shares is worked out as at the time of the acquisition of Northern Star shares on the Implementation Date. | Non-resident shareholders: 38. If you were a non-resident just before CGT event A1 happened to your Saracen shares on 12 February 2021, you disregard any capital gain or capital loss you made as a result of CGT event A1 happening as long as your Saracen shares were not taxable Australian property (section 855-10). | Anti-avoidance provisions: 39. The Commissioner will not make a determination under paragraphs 177EA(5)(b) or 204-30(3)(c) to deny the whole, or any part, of the imputation benefit you received in relation to the Special Dividend. 40. The following description of the scheme is based on information provided by Saracen. If the scheme is not carried out as described, this Ruling cannot be relied upon. 41. Other information referred to is the Scheme Implementation Deed released on the Australian Securities Exchange (ASX) on 6 October 2020, and the Scheme Booklet released on the ASX on 10 December 2020. | Saracen Mineral Holdings Limited: 42. Saracen is an Australian-resident company incorporated in 1987 and listed on the ASX since 1989. Saracen is a gold producer and is headquartered in Perth, Western Australia. 43. Saracen has a single-class share-capital structure consisting of ordinary shares. As at 30 November 2020, Saracen had 1,107,636,918 ordinary shares on issue. 44. Saracen shareholders included both residents and non-residents. At no time since incorporation did non-resident Saracen shareholders own 95% or more of the shares in Saracen. 45. Saracen has not previously paid dividends. | Northern Star Resources Ltd: 46. Northern Star is an Australian-incorporated ASX-listed company. It is a gold producer and is headquartered in Subiaco, Western Australia. 47. Northern Star has previously paid fully franked dividends. | Scheme of Arrangement: 48. On 6 October 2020, Saracen announced it had entered into a Scheme Implementation Deed with Northern Star. Northern Star proposed to acquire all the issued shares of Saracen by way of a scheme of arrangement under Part 5.1 of the Corporations Act 2001 by issuing 0.3763 fully-paid Northern Star ordinary shares for each Saracen share. 49. Under the Scheme of Arrangement, each person registered as a holder of Saracen shares on the Scheme Record Date (a scheme shareholder) was entitled to participate in the Scheme of Arrangement. 50. Scheme shareholders agreed to transfer their Saracen shares to Northern Star in return for receiving the Scheme Consideration on the Scheme Implementation Date. The Scheme Consideration per Saracen share was 0.3763 fully-paid Northern Star ordinary shares. 51. Saracen shares were removed from official quotation on the ASX on 15 February 2021 and Saracen was renamed as Northern Star (Saracen) Pty Ltd. | Special Dividend: 52. On 1 February 2021, Saracen declared a Special Dividend of 3.8 cents per share which was fully franked and payable to Saracen shareholders who held their shares at 7:00pm (AEDT) 3 February 2021 (Special Dividend Record Date). 53. Saracen paid the Special Dividend on 11 February 2021. 54. The Special Dividend was subject to the Scheme of Arrangement becoming effective. The Scheme of Arrangement was not conditional on Northern Star or a third-party financing or facilitating payment of the Special Dividend, or Northern Star or a third party being obliged to bring about the result that the Special Dividend would be received by Saracen shareholders. 55. The Special Dividend was declared and paid by Saracen in its absolute discretion. Neither Saracen nor any of its associates had any influence or control over the declaration and payment of the Special Dividend. 56. The Special Dividend complied with the requirements of the Corporations Act 2001, including section 254T of that Act. The Special Dividend was entirely debited against Saracen's retained earnings and not against an amount standing to the credit of Saracen's share capital account. It was funded from Saracen's existing cash reserves. | Other matters: 57. All Saracen shareholders were offered the opportunity to participate in the Scheme of Arrangement, and the Scheme of Arrangement was available to all Saracen shareholders on the same terms. 58. All dealings between Saracen shareholders and Northern Star were at arm's length. 59. Saracen did not have a 'significant stakeholder' or a 'common stakeholder' in relation to the Scheme of Arrangement within the meaning of those expressions in section 124-783. 60. Paragraph 124-780(3)(f) is satisfied in respect of the sale of Saracen shares to Northern Star. 61. Northern Star will not make the choice that Saracen shareholders could not obtain Subdivision 124-M roll-over for CGT event A1 happening in relation to the exchange of Saracen shares for the purposes of subsection 124-795(4). 62. The aggregate market value of Saracen's taxable Australian property assets exceed the aggregate market value of Saracen's non-taxable Australian property assets. | Key dates: 63. The following is a summary of the key dates for the Scheme of Arrangement: Commissioner of Taxation 26 May 2021 | Special Dividend: 64. The term 'dividend' is defined in subsection 6(1) to include any distribution of money made by a company to any of its shareholders which is not debited against an amount standing to the credit of the company's share capital account. 65. The Special Dividend is a distribution that was not debited against an amount standing to the credit of Saracen's share capital account. Accordingly, the Special Dividend is a dividend for the purposes of subsection 6(1). | Resident shareholders: 66. The assessable income of a resident shareholder includes dividends paid by the company out of profits derived by it from any source (subparagraph 44(1)(a)(i)). 67. If you are a resident shareholder, the Special Dividend you received is included in your assessable income as it was paid out of profits derived by Saracen. | Non-resident shareholders: Special Dividend attributable to a permanent establishment in Australia 68. If you are a non-resident and the Special Dividend is attributable to a permanent establishment in Australia at or through which you carry on business (and is not paid to you in your capacity as trustee), the Special Dividend you received is included in your assessable income (subparagraph 44(1)(b)(i)) and is not subject to withholding tax (subsection 128B(3E)). Special Dividend not attributable to a permanent establishment in Australia 69. The assessable income of a non-resident shareholder generally includes dividends to the extent to which they are paid out of profits derived by the company from sources in Australia unless another provision excludes it from the shareholder's assessable income (subparagraph 44(1)(b)(i) and subsection 44(1)). 70. However, if you are a non-resident and the Special Dividend is not attributable to a permanent establishment in Australia at or through which you carry on business, the Special Dividend is not included in your assessable income (section 128D) and is not subject to withholding tax (paragraph 128B(3)(ga)). | Special Dividend can be franked: 71. A distribution is a frankable distribution to the extent it is not unfrankable (section 202-40). Section 202-45 sets out the circumstances under which an amount or distribution is taken to be unfrankable. 72. The Special Dividend is a frankable distribution as none of the circumstances listed in section 202-45 apply to the Special Dividend. | Gross-up and tax offset: 73. If you are a qualified person in relation to the Special Dividend, your assessable income includes the amount of the franking credit (subsection 207-20(1)) and you will be entitled to a tax offset equal to the franking credit on the distribution (subsection 207-20(2)). This applies to both resident shareholders and non-resident shareholders that carry on business in Australia at or through a permanent establishment in Australia (where the dividend is attributable to the permanent establishment). 74. The assessable income of a partnership or trustee of a trust (that is not an entity taxed as a corporate tax entity, and if a trustee, that is not a complying superannuation fund) which satisfies the qualified person rule, includes the amount of the franking credit attached to the Special Dividend (subsection 207-35(1)). 75. Where you are not a qualified person in relation to the Special Dividend, you do not include the franking credit attached to the Special Dividend in your assessable income (paragraph 207-145(1)(e)) and you are not entitled to a tax offset equal to the amount of the franking credit attached to the Special Dividend (paragraph 207-145(1)(f)). | Qualified person: 76. An entity must be a qualified person in relation to the dividend in order to be entitled to a tax offset in respect of the franking credit on the dividend (subsection 207-145(1), noting paragraph 207-145(1)(a) refers to former Division 1A of Part IIIAA). 77. The test of what constitutes a qualified person is provided in former subsection 160APHO(1). Broadly, if you were not under an obligation to make a related payment in relation to the dividend, you will have to satisfy the holding period rule in relation to the primary qualification period. If you were under an obligation to make a related payment in relation to the dividend, you will have to satisfy the holding period requirement within the secondary qualification period. 78. A partner in a partnership or the beneficiary of a trust cannot be a qualified person in relation to their share of the dividend unless the partnership or the trustee of the trust is also a qualified person in relation to the dividend (former section 160APHU). Related payment rule 79. Former section 160APHN sets out examples of what constitutes the making of a related payment. Broadly, a shareholder is taken to have made or to be under an obligation to make a related payment in respect of the dividend if the shareholder has done, or is under an obligation to do, anything which has the effect of passing the benefit of the dividend to one or more other persons. 80. As the Scheme Consideration was not affected by the Special Dividend, the Commissioner considers that scheme shareholders were not under an obligation to make a related payment in relation to the Special Dividend. Primary qualification period 81. The primary qualification period is the period beginning on the day after the day on which the shareholder acquired the shares and ending 45 days after the day on which a share became ex dividend (former section 160APHD). 82. Under former subsection 160APHE(1), a share becomes ex dividend on the day after the last day on which the acquisition by a person of the share entitles them to receive the dividend. The last day on which the acquisition by a person of a Saracen share entitled the person to receive the Special Dividend was the record date for the Special Dividend of 3 February 2021. It follows that Saracen shares became ex dividend on 4 February 2021. Holding period rule 83. If you are an individual who has franking credit offsets not exceeding $5,000 for the income year ending 30 June 2021, you do not need to satisfy the holding period rule in relation to the Special Dividend (former subsection 160APHT(1)). 84. For all other shareholders, the holding period rule requires you to hold your ordinary shares at risk for a continuous period of not less than 45 days (not including the day on which the share was acquired, or the day on which the share was disposed of) during the relevant qualification period (former paragraph 160APHO(2)(a)). 85. Any days you had a materially diminished risks of loss or opportunities for gain in respect of the shares are excluded (former subsection 160APHO(3)). 86. Under former subsection 160APHM(2), you are taken to have materially diminished risks of loss and opportunities for gain on a particular day with respect to your Saracen shares if your net position on that day in relation to the shares has less than 30% of those risks and opportunities. 87. Under the Scheme of Arrangement, you no longer held your Saracen shares at risk on the Scheme Record Date (when you became committed to dispose of your Saracen shares to Northern Star under the Scheme of Arrangement). 88. Accordingly, if you acquired your Saracen shares on or before 21 December 2020 and disposed of them to Northern Star under the Scheme of Arrangement, you satisfied the holding period rule if you held those shares at risk for at least 45 continuous days during the period from when you acquired your Saracen shares to 4 February 2021. | Refundable tax offset: 89. Your entitlement to the tax offsets under Division 207 in relation to the Special Dividend is subject to the refundable tax offset rules in Division 67, provided you are not excluded by the operation of section 67-25. 90. You are specifically excluded from the operation of the refundable tax offset rules pursuant to section 67-25 if you are a: 91. Division 63 sets out the rules on how, and in what order, tax offsets are applied against an income tax liability. Where a tax offset that is subject to the refundable tax offset rules in Division 67 exceeds your income tax liability, you are entitled a refund of the difference (table item 40 of section 63-10). | Exempting entity: 92. Saracen was not an exempting entity or a former exempting entity at the time when the Special Dividend was paid to you. Therefore, section 208-195 does not apply to deny the gross-up of your assessable income by the amount of the franking credit attached to the Special Dividend you received, nor deny the tax offset to which you are otherwise entitled pursuant to Division 207 at the time when the Special Dividend was paid. | CGT event A1: 93. CGT event A1 happens if there is a change in the ownership of a CGT asset (section 104-10). The event happens when a contract to dispose of the asset is entered into or, if there is no contract, when the change of ownership occurs (subsection 104-10(3)). 94. The disposal of Saracen shares under a court approved Scheme of Arrangement results in a disposal of shares, but not under a contract. Therefore, CGT event A1 happened on the Scheme Implementation Date when there was a change of ownership in a Saracen share from you to Northern Star under the Scheme of Arrangement (subsections 104-10(1) and (2) and paragraph 104-10(3)(b)). 95. The time when CGT event A1 happens determines the income year in which you make a capital gain or capital loss and whether you are entitled to the CGT discount for any capital gain you made. | Capital proceeds: 96. The capital proceeds you receive from a CGT event is the amount of money and the market value of any property you received or are entitled to receive (worked out at the time the event happened) in respect of the event happening (subsection 116-20(1)). 97. The term 'in respect of the event happening' in subsection 116-20(1) requires the relationship between the event and the receipt of the money, or the entitlement to receive the money, to be more than coincidental. An amount is not capital proceeds received or entitled to be received in respect of a CGT event merely because it is received in association with the CGT event. [1] 98. The Scheme of Arrangement was not conditional on declaration of the Special Dividend, Northern Star or a third party financing or facilitating payment of the Special Dividend, or Northern Star or a third party being obliged to bring about the result that the Special Dividend would be paid to exiting shareholders. 99. The Commissioner considers that the Special Dividend was not received in respect of the disposal of Saracen shares under the Scheme of Arrangement, having regard to all of the relevant circumstances. Accordingly, the Special Dividend does not form part of the capital proceeds in respect of CGT event A1 happening. 100. Therefore, the capital proceeds you received from CGT event A1 happening on disposal of each Saracen share is the Scheme Consideration of 0.3763 shares in Northern Star you received. | Capital gain or capital loss: 101. You made a capital gain if the capital proceeds from the disposal of your Saracen share exceed its cost base (subsection 104-10(4)). The capital gain is the difference. 102. You made a capital loss if the capital proceeds from the disposal of your Saracen share are less than its reduced cost base (subsection 104-10(4)). The capital loss is the difference. 103. The Cost base / reduced cost base of each Saracen share depends on your individual circumstances. | Discount capital gain: 104. If you make a capital gain from the disposal of your Saracen share, you are eligible to treat the capital gain as a discount capital gain provided that: | Non-resident shareholders: 105. You disregard a capital gain or capital loss from a CGT event if you are a non-resident, or the trustee of a non-resident trust for CGT purposes, just before the CGT event happens and the CGT event happens in relation to a CGT asset that is not taxable Australian property (subsection 855-10(1)). 106. The term 'taxable Australian property' is defined in the table in section 855-15. Where you are a non-resident or a trustee of a non-resident trust for CGT purposes just before CGT event A1 happened to your Saracen shares under the Scheme of Arrangement, you cannot disregard a capital gain or capital loss from CGT event A1 happening (under subsection 855-10(1)) if, relevantly, your Saracen shares were: 107. Section 855-25 provides that a membership interest (that is, shares) held by an entity (that is, foreign-resident Saracen shareholder) in another entity (that is, Saracen) is an indirect Australian real property interest if the interest passes the: 108. The non-portfolio test requires that a foreign-resident shareholder, and their associates, together hold 10% or more of the issued shares in an entity at the time the shares are disposed or for at least 12 months during the 24 months prior to disposal of the shares. 109. The principal asset test requires that the sum of the market values of the entity's (that is, Saracen) assets that are taxable Australian real property exceeds the sum of the market values of the entity's assets that are not taxable Australian real property. 110. The aggregate market value of Saracen's taxable Australian property assets exceed the aggregate market value of Saracen's non-taxable Australian property assets. 111. Accordingly, if you are a non-resident, or the trustee of a non-resident trust for CGT purposes that holds, together with your associates, a 10% or more interest in Saracen Shares (at the time of disposal or for at least 12 months during the 24 months prior to disposal of their Saracen Shares) you will not disregard a capital gain or capital loss from a CGT event happening to your Saracen shares with respect to the scheme. | Availability of scrip for scrip roll-over if capital gain is made: 112. The tax consequences that arise concerning the scheme that is the subject of this Ruling are outlined in paragraphs 7 to 39 of this Ruling. 113. One consequence identified in this Ruling is the availability of scrip for scrip roll-over under Subdivision 124-M. The roll-over enables a shareholder to disregard a capital gain from a share that is disposed of if the shareholder receives a replacement share in exchange. It also provides special rules for calculating the Cost base / reduced cost base of the replacement share. 114. 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 that are relevant to the scheme that is subject to this Ruling are: 115. The scheme that is the subject of this Ruling satisfies the requirements for roll-over under Subdivision 124-M. | Section 177EA: 116. Section 177EA is a general anti-avoidance provision that applies where one of the purposes (other than an incidental purpose) of a particular scheme is to enable a taxpayer to obtain an imputation benefit. 117. Saracen shareholders have different tax and residency profiles. The fully franked Special Dividend was paid to all existing shareholders of Saracen in proportion to the number of shares that each shareholder held on the Record Date and irrespective of their ability to use the relevant franking credits. The Special Dividend allowed Saracen shareholders to share in the accumulated profits of Saracen. 118. It is considered that the conditions for applying section 177EA are not satisfied in relation to the payment of the Special Dividend. Therefore, the Commissioner will not make a determination under paragraph 177EA(5)(b) to deny the whole, or part, of the imputation benefits received in relation to the Special Dividend. | Section 204-30: 119. Section 204-30 applies where a corporate tax entity streams the payment of dividends to its members in such a way that certain shareholders (referred to as 'favoured members') obtain imputation benefits, and other shareholders (referred to as 'disadvantaged members') obtain lesser or no imputation benefits, whether or not they receive other benefits. The favoured members are those that derive a greater benefit from imputation benefits than disadvantaged members. 120. For section 204-30 to apply, members to whom distributions are streamed must derive a greater benefit from franking credits than another member entity The words 'derive a greater benefit from franking credits' are defined in subsection 204-30(8) by reference to the ability of the members to fully use imputation benefits. 121. Under the Scheme of Arrangement, you received an imputation benefit when the Special Dividend was paid. The Special Dividend was paid equally to all Saracen shareholders and was fully franked regardless of your tax profile. Accordingly, it cannot be said that Saracen selectively directed the flow of franked dividends to those members who obtained the most benefit from the franking credits. 122. As the conditions in subsection 204-30(1) were not met, the Commissioner will not make a determination under paragraph 204-30(3)(c) to deny the whole, or any part, of the imputation benefits received by you in relation to the Special Dividend. 123. This paragraph sets out the details of the provisions ruled upon or referenced in 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). Not previously issued as a draft


Appendix: Special Dividend: 64. The term 'dividend' is defined in subsection 6(1) to include any distribution of money made by a company to any of its shareholders which is not debited against an amount standing to the credit of the company's share capital account. 65. The Special Dividend is a distribution that was not debited against an amount standing to the credit of Saracen's share capital account. Accordingly, the Special Dividend is a dividend for the purposes of subsection 6(1). | Resident shareholders: 66. The assessable income of a resident shareholder includes dividends paid by the company out of profits derived by it from any source (subparagraph 44(1)(a)(i)). 67. If you are a resident shareholder, the Special Dividend you received is included in your assessable income as it was paid out of profits derived by Saracen. | Non-resident shareholders: Special Dividend attributable to a permanent establishment in Australia 68. If you are a non-resident and the Special Dividend is attributable to a permanent establishment in Australia at or through which you carry on business (and is not paid to you in your capacity as trustee), the Special Dividend you received is included in your assessable income (subparagraph 44(1)(b)(i)) and is not subject to withholding tax (subsection 128B(3E)). Special Dividend not attributable to a permanent establishment in Australia 69. The assessable income of a non-resident shareholder generally includes dividends to the extent to which they are paid out of profits derived by the company from sources in Australia unless another provision excludes it from the shareholder's assessable income (subparagraph 44(1)(b)(i) and subsection 44(1)). 70. However, if you are a non-resident and the Special Dividend is not attributable to a permanent establishment in Australia at or through which you carry on business, the Special Dividend is not included in your assessable income (section 128D) and is not subject to withholding tax (paragraph 128B(3)(ga)). | Special Dividend can be franked: 71. A distribution is a frankable distribution to the extent it is not unfrankable (section 202-40). Section 202-45 sets out the circumstances under which an amount or distribution is taken to be unfrankable. 72. The Special Dividend is a frankable distribution as none of the circumstances listed in section 202-45 apply to the Special Dividend. | Gross-up and tax offset: 73. If you are a qualified person in relation to the Special Dividend, your assessable income includes the amount of the franking credit (subsection 207-20(1)) and you will be entitled to a tax offset equal to the franking credit on the distribution (subsection 207-20(2)). This applies to both resident shareholders and non-resident shareholders that carry on business in Australia at or through a permanent establishment in Australia (where the dividend is attributable to the permanent establishment). 74. The assessable income of a partnership or trustee of a trust (that is not an entity taxed as a corporate tax entity, and if a trustee, that is not a complying superannuation fund) which satisfies the qualified person rule, includes the amount of the franking credit attached to the Special Dividend (subsection 207-35(1)). 75. Where you are not a qualified person in relation to the Special Dividend, you do not include the franking credit attached to the Special Dividend in your assessable income (paragraph 207-145(1)(e)) and you are not entitled to a tax offset equal to the amount of the franking credit attached to the Special Dividend (paragraph 207-145(1)(f)). | Qualified person: 76. An entity must be a qualified person in relation to the dividend in order to be entitled to a tax offset in respect of the franking credit on the dividend (subsection 207-145(1), noting paragraph 207-145(1)(a) refers to former Division 1A of Part IIIAA). 77. The test of what constitutes a qualified person is provided in former subsection 160APHO(1). Broadly, if you were not under an obligation to make a related payment in relation to the dividend, you will have to satisfy the holding period rule in relation to the primary qualification period. If you were under an obligation to make a related payment in relation to the dividend, you will have to satisfy the holding period requirement within the secondary qualification period. 78. A partner in a partnership or the beneficiary of a trust cannot be a qualified person in relation to their share of the dividend unless the partnership or the trustee of the trust is also a qualified person in relation to the dividend (former section 160APHU). Related payment rule 79. Former section 160APHN sets out examples of what constitutes the making of a related payment. Broadly, a shareholder is taken to have made or to be under an obligation to make a related payment in respect of the dividend if the shareholder has done, or is under an obligation to do, anything which has the effect of passing the benefit of the dividend to one or more other persons. 80. As the Scheme Consideration was not affected by the Special Dividend, the Commissioner considers that scheme shareholders were not under an obligation to make a related payment in relation to the Special Dividend. Primary qualification period 81. The primary qualification period is the period beginning on the day after the day on which the shareholder acquired the shares and ending 45 days after the day on which a share became ex dividend (former section 160APHD). 82. Under former subsection 160APHE(1), a share becomes ex dividend on the day after the last day on which the acquisition by a person of the share entitles them to receive the dividend. The last day on which the acquisition by a person of a Saracen share entitled the person to receive the Special Dividend was the record date for the Special Dividend of 3 February 2021. It follows that Saracen shares became ex dividend on 4 February 2021. Holding period rule 83. If you are an individual who has franking credit offsets not exceeding $5,000 for the income year ending 30 June 2021, you do not need to satisfy the holding period rule in relation to the Special Dividend (former subsection 160APHT(1)). 84. For all other shareholders, the holding period rule requires you to hold your ordinary shares at risk for a continuous period of not less than 45 days (not including the day on which the share was acquired, or the day on which the share was disposed of) during the relevant qualification period (former paragraph 160APHO(2)(a)). 85. Any days you had a materially diminished risks of loss or opportunities for gain in respect of the shares are excluded (former subsection 160APHO(3)). 86. Under former subsection 160APHM(2), you are taken to have materially diminished risks of loss and opportunities for gain on a particular day with respect to your Saracen shares if your net position on that day in relation to the shares has less than 30% of those risks and opportunities. 87. Under the Scheme of Arrangement, you no longer held your Saracen shares at risk on the Scheme Record Date (when you became committed to dispose of your Saracen shares to Northern Star under the Scheme of Arrangement). 88. Accordingly, if you acquired your Saracen shares on or before 21 December 2020 and disposed of them to Northern Star under the Scheme of Arrangement, you satisfied the holding period rule if you held those shares at risk for at least 45 continuous days during the period from when you acquired your Saracen shares to 4 February 2021. | Refundable tax offset: 89. Your entitlement to the tax offsets under Division 207 in relation to the Special Dividend is subject to the refundable tax offset rules in Division 67, provided you are not excluded by the operation of section 67-25. 90. You are specifically excluded from the operation of the refundable tax offset rules pursuant to section 67-25 if you are a: 91. Division 63 sets out the rules on how, and in what order, tax offsets are applied against an income tax liability. Where a tax offset that is subject to the refundable tax offset rules in Division 67 exceeds your income tax liability, you are entitled a refund of the difference (table item 40 of section 63-10). | Exempting entity: 92. Saracen was not an exempting entity or a former exempting entity at the time when the Special Dividend was paid to you. Therefore, section 208-195 does not apply to deny the gross-up of your assessable income by the amount of the franking credit attached to the Special Dividend you received, nor deny the tax offset to which you are otherwise entitled pursuant to Division 207 at the time when the Special Dividend was paid. | CGT event A1: 93. CGT event A1 happens if there is a change in the ownership of a CGT asset (section 104-10). The event happens when a contract to dispose of the asset is entered into or, if there is no contract, when the change of ownership occurs (subsection 104-10(3)). 94. The disposal of Saracen shares under a court approved Scheme of Arrangement results in a disposal of shares, but not under a contract. Therefore, CGT event A1 happened on the Scheme Implementation Date when there was a change of ownership in a Saracen share from you to Northern Star under the Scheme of Arrangement (subsections 104-10(1) and (2) and paragraph 104-10(3)(b)). 95. The time when CGT event A1 happens determines the income year in which you make a capital gain or capital loss and whether you are entitled to the CGT discount for any capital gain you made. | Capital proceeds: 96. The capital proceeds you receive from a CGT event is the amount of money and the market value of any property you received or are entitled to receive (worked out at the time the event happened) in respect of the event happening (subsection 116-20(1)). 97. The term 'in respect of the event happening' in subsection 116-20(1) requires the relationship between the event and the receipt of the money, or the entitlement to receive the money, to be more than coincidental. An amount is not capital proceeds received or entitled to be received in respect of a CGT event merely because it is received in association with the CGT event. [1] 98. The Scheme of Arrangement was not conditional on declaration of the Special Dividend, Northern Star or a third party financing or facilitating payment of the Special Dividend, or Northern Star or a third party being obliged to bring about the result that the Special Dividend would be paid to exiting shareholders. 99. The Commissioner considers that the Special Dividend was not received in respect of the disposal of Saracen shares under the Scheme of Arrangement, having regard to all of the relevant circumstances. Accordingly, the Special Dividend does not form part of the capital proceeds in respect of CGT event A1 happening. 100. Therefore, the capital proceeds you received from CGT event A1 happening on disposal of each Saracen share is the Scheme Consideration of 0.3763 shares in Northern Star you received. | Capital gain or capital loss: 101. You made a capital gain if the capital proceeds from the disposal of your Saracen share exceed its cost base (subsection 104-10(4)). The capital gain is the difference. 102. You made a capital loss if the capital proceeds from the disposal of your Saracen share are less than its reduced cost base (subsection 104-10(4)). The capital loss is the difference. 103. The Cost base / reduced cost base of each Saracen share depends on your individual circumstances. | Discount capital gain: 104. If you make a capital gain from the disposal of your Saracen share, you are eligible to treat the capital gain as a discount capital gain provided that: | Non-resident shareholders: 105. You disregard a capital gain or capital loss from a CGT event if you are a non-resident, or the trustee of a non-resident trust for CGT purposes, just before the CGT event happens and the CGT event happens in relation to a CGT asset that is not taxable Australian property (subsection 855-10(1)). 106. The term 'taxable Australian property' is defined in the table in section 855-15. Where you are a non-resident or a trustee of a non-resident trust for CGT purposes just before CGT event A1 happened to your Saracen shares under the Scheme of Arrangement, you cannot disregard a capital gain or capital loss from CGT event A1 happening (under subsection 855-10(1)) if, relevantly, your Saracen shares were: 107. Section 855-25 provides that a membership interest (that is, shares) held by an entity (that is, foreign-resident Saracen shareholder) in another entity (that is, Saracen) is an indirect Australian real property interest if the interest passes the: 108. The non-portfolio test requires that a foreign-resident shareholder, and their associates, together hold 10% or more of the issued shares in an entity at the time the shares are disposed or for at least 12 months during the 24 months prior to disposal of the shares. 109. The principal asset test requires that the sum of the market values of the entity's (that is, Saracen) assets that are taxable Australian real property exceeds the sum of the market values of the entity's assets that are not taxable Australian real property. 110. The aggregate market value of Saracen's taxable Australian property assets exceed the aggregate market value of Saracen's non-taxable Australian property assets. 111. Accordingly, if you are a non-resident, or the trustee of a non-resident trust for CGT purposes that holds, together with your associates, a 10% or more interest in Saracen Shares (at the time of disposal or for at least 12 months during the 24 months prior to disposal of their Saracen Shares) you will not disregard a capital gain or capital loss from a CGT event happening to your Saracen shares with respect to the scheme. | Availability of scrip for scrip roll-over if capital gain is made: 112. The tax consequences that arise concerning the scheme that is the subject of this Ruling are outlined in paragraphs 7 to 39 of this Ruling. 113. One consequence identified in this Ruling is the availability of scrip for scrip roll-over under Subdivision 124-M. The roll-over enables a shareholder to disregard a capital gain from a share that is disposed of if the shareholder receives a replacement share in exchange. It also provides special rules for calculating the Cost base / reduced cost base of the replacement share. 114. 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 that are relevant to the scheme that is subject to this Ruling are: 115. The scheme that is the subject of this Ruling satisfies the requirements for roll-over under Subdivision 124-M. | Section 177EA: 116. Section 177EA is a general anti-avoidance provision that applies where one of the purposes (other than an incidental purpose) of a particular scheme is to enable a taxpayer to obtain an imputation benefit. 117. Saracen shareholders have different tax and residency profiles. The fully franked Special Dividend was paid to all existing shareholders of Saracen in proportion to the number of shares that each shareholder held on the Record Date and irrespective of their ability to use the relevant franking credits. The Special Dividend allowed Saracen shareholders to share in the accumulated profits of Saracen. 118. It is considered that the conditions for applying section 177EA are not satisfied in relation to the payment of the Special Dividend. Therefore, the Commissioner will not make a determination under paragraph 177EA(5)(b) to deny the whole, or part, of the imputation benefits received in relation to the Special Dividend. | Section 204-30: 119. Section 204-30 applies where a corporate tax entity streams the payment of dividends to its members in such a way that certain shareholders (referred to as 'favoured members') obtain imputation benefits, and other shareholders (referred to as 'disadvantaged members') obtain lesser or no imputation benefits, whether or not they receive other benefits. The favoured members are those that derive a greater benefit from imputation benefits than disadvantaged members. 120. For section 204-30 to apply, members to whom distributions are streamed must derive a greater benefit from franking credits than another member entity The words 'derive a greater benefit from franking credits' are defined in subsection 204-30(8) by reference to the ability of the members to fully use imputation benefits. 121. Under the Scheme of Arrangement, you received an imputation benefit when the Special Dividend was paid. The Special Dividend was paid equally to all Saracen shareholders and was fully franked regardless of your tax profile. Accordingly, it cannot be said that Saracen selectively directed the flow of franked dividends to those members who obtained the most benefit from the franking credits. 122. As the conditions in subsection 204-30(1) were not met, the Commissioner will not make a determination under paragraph 204-30(3)(c) to deny the whole, or any part, of the imputation benefits received by you in relation to the Special Dividend.


What this Ruling is about | Appendix 2 - Legislative provisions | If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. | Scheme Implementation Deed executed | First Court Hearing (lodged Scheme Booklet with court) | Dispatch Scheme booklet to Saracen's shareholders | 7:00pm (AEDT) 5 February 2021 | Special Dividend Payment Date | Saracen shares delisted from ASX | Assessability of Special Dividend and withholding tax | former Part IIIAA Division 1A


Related rulings: TR 2010/4
Legislative references: TAA 1953 Corporations Act 2001 Pt 5.1 Corporations Act 2001 254T