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INCOME TAX ASSESSMENT ACT 1997 - SECT 125.75

Exceptions to subsection 125 - 70(2)

Employee share schemes

  (1)   In working out whether the requirements in subsection   125 - 70(2) are met, disregard each of the * ownership interests described in subsections   (2) and (3) if, just before the * demerger, those interests (taking into account either or both of their number and value) represented not more than 3% of the total * ownership interests in the entity.

  (2)   An * ownership interest, in a company, that is owned by an entity is disregarded under subsection   (1) if:

  (a)   the entity acquired a beneficial interest in the ownership interest under an * employee share scheme; and

  (b)   these provisions apply to the beneficial interest:

  (i)   Subdivision   83A - B and the provisions referred to in paragraphs 83A - 33(1)(a) to (c); or

  (ii)   Subdivision   83A - B and the provisions referred to in paragraphs 83A - 35(1)(a) and (b); or

  (iii)   Subdivision   83A - C; and

  (c)   the ownership interest is not a fully - paid ordinary * share.

  (3)   An * ownership interest, in a trust, that is owned by an entity is disregarded under subsection   (1) if:

  (a)   both of the following would apply if Division   83A (about employee share schemes) applied to ownership interests in trusts in the same way as it applies to * shares:

  (i)   the entity acquired a beneficial interest in the ownership interest under an * employee share scheme;

  (ii)   the provisions referred to in subparagraph   (2)(b)(i), (ii) or (iii) apply to the beneficial interest; and

  (b)   the ownership interest is not a fully - paid unit.

Adjusting instruments

  (4)   In working out whether the requirements in subsection   125 - 70(2) are met, disregard each of the * ownership interests described in subsection   (5) ( adjusting instruments ) if, just before the * demerger, those interests represented not more than 10%, or such greater percentage (not exceeding 17%) as is prescribed, of the ownership interests in the entity.

  (5)   An * ownership interest in a * listed public company or a * listed widely held trust that is the * head entity 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.


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