Merger of AMP Limited (AMP) and AXA Asia Pacific Holdings (AXA) fact sheet

Overview

This page contains information about the merger of AMP and AXA on 30 March 2011.

This information applies to you if:

• you are an individual (not a company or trust)
• you are an Australian resident for tax purposes
• you held ordinary shares in AXA, which participated in the merger with AMP in 2011
• you did not acquire your shares under an employee share scheme, and
• any gain or loss you made on the shares is a capital gain or capital loss - this means that you held your shares as an investment asset, not
• • as trading stock
  • as part of carrying on a business, or
  • to make a short-term or one-off commercial gain.
   

What happened?

On 30 March 2011, AXA merged with AMP.

AXA ordinary shareholders received 0.73 fully-paid ordinary shares in AMP and $2.5464 cash for each ordinary share they held on 16 March 2011.

AXA also paid a final unfranked dividend of 9.25 cents per ordinary share.

The market value of each AMP share received by AXA shareholders is $5.32.

Are there any tax consequences for me?

There are four consequences:

• you must decide whether or not to choose CGT (capital gains tax) rollover
• you must work out your capital gain or capital loss and take it into account in working out the net capital gain to include in your 2010-11 tax return
• you must determine the cost base of your new AMP shares
• you must include the final dividend from AXA in your 2010-11 tax return.

What are the CGT consequences of the disposal of my AXA shares?

A CGT event happened when you disposed of your AXA shares in the merger with AMP on 30 March 2011.

You may have made a capital gain or capital loss on your AXA shares, depending on their cost base, or reduced cost base, and the amount (capital proceeds) you received for them.

The capital proceeds for each AXA share is $3.8836 (0.73 multiplied by $5.32 - the market value of an AMP share on 30 March 2011) plus $2.5464 cash.

Scrip-for-scrip rollover

Scrip-for-scrip rollover is available for this merger if you made a capital gain, to the extent that you received AMP shares for your AXA shares.

Scrip-for-scrip rollover is not available for the cash you received for your AXA shares. Therefore, you will have made a capital gain or capital loss for the 2011 year.

The rollover available is, therefore, a partial rollover.

Choosing scrip-for-scrip rollover

Scrip-for-scrip rollover allows you to defer your capital gain until a later CGT event happens to your shares. You do not have to choose rollover relief.

If you choose scrip-for-scrip rollover, the capital gain made from the exchange of the AXA shares for AMP shares is disregarded and the cost base of your new AMP shares is based on the cost base of your original AXA shares.

You can apply the CGT discount of 50% when you dispose of your new AMP shares, provided the combined period that you owned the original AXA shares and the new AMP shares is at least 12 months and you satisfy the other requirements for applying the discount.

Example 1

Partial scrip-for-scrip rollover chosen

Graham acquired 1,000 AXA shares on 30 October 2009 for $4,350, including $50 brokerage. The cost base for each AXA share is $4.35.

The market value of each AMP share on 30 March 2011 is $5.32.

On 30 March 2011, Graham receives $2,546.40 cash and 730 new AMP shares in exchange for his 1,000 AXA shares. The market value of his new AMP shares is $3,883.60 (730 x $5.32).

Graham chooses partial scrip-for-scrip rollover, allowing him to disregard the capital gain he made when he received the 730 new AMP shares for his AXA shares.

Graham cannot disregard the capital gain he made when he received cash for his AXA shares.

Total capital proceeds

Cash + AMP shares

= $2,546.40 + 3,883.60

= $6,430

Cost base of cash component

To work out the amount of the cost base of his AXA shares that is attributable to the cash received:

Cost base of AXA shares exchanged

x

cash                             market value of AMP shares + cash

$4,350 x ($2,546.40 / $6,430)

= $ 1,722.68

Cost base of new AMP shares

The remaining portion of the cost base of Graham's AXA shares is used to determine the first element of the cost base (and reduced cost base) for the AMP shares he received.

Cost base of AXA shares x (market value of AMP shares / (market value of AMP shares + cash))

$4,350 x ($3,883.60 / $6,430)

= $2,627.32

Graham divides $2,627.32 by 730 to determine the cost base of each AMP share he received is $3.60.

Capital gain on cash component

Graham calculates his capital gain on the cash component of the capital proceeds as follows:

Cash - cost base of AXA shares exchanged for the cash

$2,546.40 - $1,722.68

= $823.72

For the purpose of determining if the capital gain is a discount capital gain, Graham is taken to have acquired his new AMP shares on 30 October 2009 when he acquired his corresponding AXA shares.

As Graham has owned his AXA shares for more than 12 months, he can apply the CGT discount to reduce the capital gain by half to $411.86.

Graham takes his $411.86 capital gain into account in working out his net capital gain to include at item 18 (capital gains) in his 2010-11 tax return (supplementary section).

Not choosing scrip-for-scrip rollover

If you have made a capital loss, or have made a capital gain and do not choose scrip-for-scrip rollover, you need to take it into account in working out your net capital gain to include at item 18 (capital gains) in your 2010-11 tax return (supplementary section).

If you have made a capital gain and held your AXA shares for at least 12 months, you may be entitled to the CGT discount of 50%.

The cost base of each of your new AMP shares is $5.32.

For CGT purposes, you acquired these AMP shares on 30 March 2011.

Example 2

Partial scrip-for-scrip rollover is not chosen

Graham purchased 1,000 AXA shares on 30 October 2009 for $4,350, including $50 brokerage. The cost base for each AXA share is $4.35 ($4,350 divided by 1,000 shares).

The market value of each AMP share on 30 March 2011 is $5.32.

On 30 March 2011, Graham receives $2,546.40 cash and 730 AMP shares in exchange for his 1,000 AXA shares. The market value of his new AMP shares is $3,883.60 (730 x $5.32).

Graham decides not to choose scrip-for-scrip rollover.

Working out the capital gain

Graham works out his capital gain by subtracting the cost base of his AXA shares from the total capital proceeds he received for them - that is, the cash and the market value of the AMP shares.

Capital proceeds	= cash + market value of AMP shares
	= $2,546.40 + $3,883.60
	= $6,430
Cost base of AXA shares	= $4,350
Capital gain	= Capital proceeds - cost base of AXA shares
	= $6,430 - $4,350
	= $2,080

Assume that Graham has a $1,000 capital loss in the 2010-11 income year. Graham is required to reduce his capital gain by the capital loss before applying the CGT discount. Graham, therefore, has a capital gain of $1,080 ($2,080 - $1,000).

As Graham has owned his AXA shares for more than 12 months, he can apply the CGT discount to reduce his capital gain by half to $540.

Graham takes his $540 capital gain into account in working out his net capital gain to include at item 18 (capital gains) in his 2010-11 tax return (supplementary section).

Cost base of each new AMP share

The cost base and reduced cost base of each new AMP share is $5.32.

What are the tax consequences of the final dividend?

The final unfranked dividend of 9.25 cents per share paid by AXA needs to be included in your 2010-11 tax return. It does not form part of the capital proceeds you received.

More information

For details of this merger, see Class Ruling CR 2011/36 Income tax: scrip for scrip: exchange of shares in AXA Asia Pacific Holdings Limited for shares in AMP Limited.

For more information about the tax implications of owning shares generally, see the following publications:

• You and your shares (NAT 2632) - this publication is for individuals investing in shares or convertible notes and offers guidance on the tax of dividends from investments (including an explanation of the 45-day holding rule), allowable deductions from dividend income and record-keeping requirements for investors.
• Guide to capital gains tax (NAT 4151) - this publication explains how capital gains tax works and will help you to calculate your net capital gain or net capital loss.