Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 125.55

When a roll - over is available for a demerger

  (1)   You can choose to obtain a roll - over if:

  (a)   you own an * ownership interest in a company or trust (your original interest ); and

  (b)   the company or trust is the * head entity of a * demerger group; and

  (c)   a * demerger happens to the demerger group; and

  (d)   under the demerger, a * CGT event happens to your original interest and you * acquire a new or replacement interest (your new interest ) in the * demerged entity.

Note 1:   Section   125 - 80 sets out what the roll - over is.

Note 2:   You have to make cost base adjustments even if there is no CGT event: see section   125 - 90.

Example:   Peter owns shares (his original interests) in Company A, a public company. Company B is a wholly owned subsidiary of Company A. Company A announces a demerger utilising a proportionate capital reduction and the disposal of all its shares in Company B to its 320,000 shareholders. Following the demerger all of the shareholders in Company A, including Peter, will own all of the shares in Company B (their new interests).

  (2)   You cannot choose to obtain a roll - over under this Subdivision for an original interest if:

  (a)   you are a foreign resident; and

  (b)   the new interest you * acquire under the * demerger in exchange for that original interest is not * taxable Australian property just after you acquire it.

Note:   For taxable Australian property , see section   855 - 15.


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