Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p51
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 51/59)
Character Range: 2658837–2661510

of a *demerger group is disregarded under subsection (4) if:
 (a) the adjusting instrument was issued on terms that ensure that its value is not adversely affected by an *arrangement undertaken by the company or trust in relation to other ownership interests in the company or trust; and
 (b) if the adjusting instrument can be converted into an ordinary *share in the company or an ordinary unit in the trust, any conversion will occur on a basis:
 (i) that is set out in the terms of the issue of the instrument; and
 (ii) that is adjusted to take into account a capital reduction or a capital reconstruction; and
 (c) before conversion, the owner of the adjusting instrument does not have a right to participate in distributions of profit or capital except as set out in the terms of the issue of the instrument; and
 (d) the adjusting instrument deals with the effect of a *demerger that happens to the demerger group on the value of the instrument.
Example: Some examples of adjusting instruments are:
• convertible preference shares, including reset preference shares;
• convertible notes;
• partly paid shares where the paid‑up amount is adjusted to reflect a capital reduction.

Additional exceptions
 (6) The regulations may provide that, in working out whether the requirements in subsection 125‑70(2) are met, other *ownership interests of a kind specified in the regulations are to be disregarded if, just before the *demerger, those interests represented not more than a prescribed percentage of the ownership interests in the entity.
 (7) However, the total percentage of *ownership interests to be disregarded under this section must not exceed 20% of the ownership interests in the entity.

125‑80  What is the roll‑over?
 (1) If you choose the roll‑over, a *capital gain or *capital loss you make from a *CGT event happening under the *demerger to an original interest you own is disregarded.
 (2) If you choose the roll‑over, the first element of the *cost base and *reduced cost base of:
 (a) each new interest that you are not taken to have *acquired before 20 September 1985; and
 (b) if not all of your original interests ended under the *demerger—each of your remaining original interests that you acquired on or after 20 September 1985;
is such proportion of the sum of the cost bases of all your original interests that you acquired on or after 20 September 1985 (worked out just before the demerger) as is reasonable having regard to the matters specified in subsection (3).
Note 1: These rules replace the cost base and reduced cost base adjustments in CGT event E4 and CGT event G1.
Note 2: The head entity or the demerging entity may advise you