This document contains information for current and/or former shareholders in Brambles Limited (Brambles) after the demerger of Recall Holdings Limited (Recall).
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 shares in Brambles on 16 December 2013 (the record date)
- you hold your shares as an investment asset, not
- as trading stock
- as part of carrying on a business
- to make a short-term or one-off commercial gain.
The demerger
Brambles is an Australian resident company listed on the Australian Securities Exchange (ASX). On 18 December 2013 Brambles demerged Recall Holdings Limited (Recall).
Brambles shareholders received 1 Recall share for every 5 Brambles shares they held as of 16 December 2013.
As a result of the demerger, Brambles shareholders will hold shares in both Brambles and Recall.
Brambles also made a demerger distribution to Brambles shareholders of $0.8681 per share consisting of:
- a capital reduction amount of $0.4803 per Brambles share
- a demerger dividend amount of $0.3878 per Brambles share.
Demerger dividend
Brambles shareholders received a demerger dividend of $0.3878 per Brambles share. The demerger dividend is neither assessable nor exempt income, therefore, you do not include it on your income tax return.
Capital reduction amount
Brambles shareholders received a capital reduction amount of $0.4803 per share as a result of the demerger. This resulted in CGT event G1 happening to your shares on 18 December 2013.
What do I need to do?
The return of capital under the demerger resulted in a CGT event happening to each Brambles share. Therefore, there are two things you must do:
- Decide whether you want to choose demerger rollover.
- Recalculate the cost base and reduced cost base of your Brambles and Recall shares.
Your total cost base just before the demerger will be equal to the first element of the sum of your Brambles and Recall shares just after the demerger. This means that just after the demerger, your cost base and your reduced cost base will be the same.
End of attentionWhat is the difference between choosing demerger rollover relief and not choosing it?
Any capital gain resulting from the return of capital of $0.4803 per share can be disregarded, if you choose demerger rollover. A capital gain would only arise if the cost base of your Brambles shares just before the demerger was less than $0.4803 per share.
If you do not choose demerger rollover, you must take any capital gain into account when you calculate your net capital gain or loss for your 2014 income tax return.
The demerger - recalculating your cost base
Under the demerger of Recall from Brambles, you received one Recall share for every five shares in Brambles you held on 16 December 2013. You can choose demerger rollover for this transaction, which means that you can ignore any capital gain you made under the demerger. You cannot make a capital loss under this demerger.
Whether you choose demerger rollover or not, you must calculate the new cost base of your Brambles and Recall shares. You do this by allocating the original cost base of your Brambles shares across both your existing Brambles shares and your new Recall shares. You do this on the basis of their relative market values, which are:
- Brambles shares 90.91%
- Recall shares 9.09%
If you don't choose demerger rollover and you made a capital gain under the demerger (this will only happen if the cost base of your Brambles shares just before the demerger was less than $0.3878), you take the capital gain into account in working out your net capital gain or net capital loss for your 2014 income tax return.
End of further informationExample
Example 1 – calculating your new cost base
Gerry owned one parcel of 5,000 Brambles shares that he purchased in December 2010 and another parcel of 1,000 shares that he purchased in October 2012. Therefore, he owned 6,000 shares at the time of the demerger. Just before the demerger, the two parcels had cost bases of $12,000 and $8,000 respectively. Under the demerger, he received 1,200 Recall shares. He chooses demerger rollover.
Gerry works out the cost base of his Brambles and Recall shares as follows:
Step |
In this example: |
|
The cost base of all Gerry's Brambles shares: = $12,000 + $8,000 = $20,000 |
|
Brambles: Total cost base = $20,000 x 90.91% = $18,182 Recall: Total cost base = $20,000 x 9.09% = $1,818 |
|
Brambles: Cost base per share = $18,182 divided by 6,000 shares = $3.03 Recall: Cost base per share =$1,818 divided by 1,200 shares = $1.52 per share |
Gerry's new cost bases are:
Brambles $3.03 per share
Recall $1.52 per share
End of exampleAcquisition date
The acquisition date of your new Recall shares will be the same date that you acquired the original Brambles shares. This is the case whether or not you have chosen demerger rollover.
Find out more:
You can also use our online Demergers calculator to work out this part.
- Demerger Calculator
- Demergers: Overview
- CR 2014/12 – Income tax: demerger of Recall Holdings Limited by Brambles Limited