Background

Under the demerger, Treasury Wine Estates Limited (Treasury Wine) demerged from Foster's.

The demerger involved a share capital reduction by Foster's and the transfer to Foster's shareholders of one Treasury Wine share for every three shares they owned in Foster's at 7.00pm (Melbourne time) on the record date of 16 May 2011 (rounded up or down to the nearest whole Treasury Wine share).

1. What do I have to do if I was a shareholder in Foster's when Treasury Wines was demerged?

There are two things you must do:

1. consider if you want to choose demerger rollover
2. recalculate the cost base and reduced cost base of your Foster's and Treasury Wine shares.

2. What are the capital gains tax (CGT) consequences of the demerger?

A CGT event happened to each Foster's share you held at the time Foster's reduced its share capital.

You may have made a capital gain on your Foster's shares, if the capital reduction amount attributable to each Foster's share is more than the cost base of each Foster's share you held before the demerger.

The capital reduction amount for each Foster's share was $0.64.

Rollover relief is available for this demerger if you made a capital gain.

3. What are the consequences of choosing the rollover?

The rollover allows you to disregard any capital gain resulting from the $0.64 capital reduction amount.

A capital gain would arise only if the cost base of each of your Foster's shares was less than $0.64. You cannot make a capital loss on the share capital reduction.

4. What are the consequences of not choosing the rollover?

If you do not choose the rollover and you made a capital gain on the share capital reduction you must take the capital gain into account in calculating your net capital gain or net capital loss in your 2010-11 tax return.

5. How do I recalculate the cost base and reduced cost base of my Foster's shares and Treasury Wine shares I received from this demerger?

Even if you do not choose the rollover, you must recalculate the cost base and reduced cost base of each of your Foster's shares and the Treasury Wine shares you received for those shares.

The cost base for your Foster's shares just before the demerger (not including indexation) is spread across those shares and the Treasury Wine shares you received for your Foster's shares.

The spreading is based on the value that Treasury Wine represented of Foster's at that time using the five day volume-weighted average price (VWAP) of Foster's shares and Treasury Wines shares from the effective date of the demerger, which is 20.04%. The remaining 79.96% is spread across your Foster's shares.