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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