Document ID: chunk:federal_register_of_legislation:C2004A00986:clause:11_4:p1
Version: federal_register_of_legislation:C2004A00986
Segment Type: clause
Provision Reference: sch 11 cl 4 (pt 1/2)
Character Range: 69639–72345

4  At the end of Division 126
Add:

Subdivision 126‑D—Entitlement to shares after demutualisation and scrip for scrip roll‑over

Guide to Subdivision 126‑D

126‑185  What this Subdivision is about

      This Subdivision sets out when there is a roll‑over for a CGT event that happens because a beneficiary becomes absolutely entitled to a share as against the trustee where the trustee obtained a roll‑over under Subdivision 124‑M following a demutualisation.

Table of sections

Operative provisions

126‑190 When there is a roll‑over
126‑195 Consequences of roll‑over

[This is the end of the Guide.]

Operative provisions

126‑190  When there is a roll‑over

  There is a roll‑over if:
 (a) an insurance company demutualises; and
 (b) the trustee of a trust holds a *share issued under the demutualisation in trust for an entity to whom the share would have been issued if the entity could, and were in a position to, prove the entity's entitlement to the share; and
 (c) the trustee obtains a roll‑over under Subdivision 124‑M of this Act (Scrip for scrip roll‑over) for the share because the trustee exchanges the share for a share (the replacement share) in another company (whether or not the trustee receives something in addition to the replacement share); and
 (d) a *CGT event happens in relation to the replacement share because the entity becomes absolutely entitled to the share as against the trustee.

126‑195  Consequences of roll‑over

 (1) A *capital gain or *capital loss the trustee makes from the *CGT event is disregarded.

 (2) The first element of the *cost base of the replacement share for the entity is the cost base of the replacement share in the hands of the trustee just before the *CGT event happened. The first element of the *reduced cost base of the replacement share for the entity is worked out similarly.

Example: The JB mutual insurance company demutualises, issuing shares in JB Limited to its policyholders. It is unable to locate some of its policyholders so it establishes a trust and issues shares to the trustee on behalf of those policyholders. Steve is one of those policyholders (being potentially entitled to 50 shares).

 JB Limited is taken over by PVDM Limited. Members of JB are issued with 2 shares in PVDM for each share they have in JB. The trustee obtains a roll‑over under Subdivision 124‑M for the exchange. Each PVDM share held by the trustee has a cost base and reduced cost base of $15.

 Steve writes to the trustee and proves his entitlement to the shares held in trust for him.

 There is a roll‑over under this Subdivision so that any capital gain or loss made by the trustee is disregarded. The first element of the cost base and