Income Tax Assessment Act 1936

SCHEDULE 2H - DEMUTUALISATION OF MUTUAL ENTITIES OTHER THAN INSURANCE COMPANIES AND HEALTH INSURERS  

Division 326 - DEMUTUALISATION  

Subdivision 326-G - CGT consequences of disposal of rights or interests resulting from extinguishment of membership rights  

SECTION 326-200   DISPOSAL OF INTEREST IN TRUST THAT HOLDS SHARES IN DEMUTUALISED ENTITY  

326-200(1)    
This section applies if:

(a) under the distributing trust method of demutualisation of a mutual entity:

(i) the membership rights of an existing member of the entity are extinguished; and

(ii) shares in the demutualised entity are issued to a trustee; and

(b) as a result of the extinguishment of the rights, the member acquires an interest in the trust constituted by the right to have shares in the demutualised entity held by the trustee transferred by the trustee to the member or disposed of by the trustee on behalf of the member; and

(c) the member disposes of the whole or a part of the interest otherwise than by receiving the shares or proceeds of the sale of the shares.

326-200(2)    
For the purpose of working out whether the member made a capital gain or capital loss from the disposal, the member is taken to have done the following:

(a) to have paid for the acquisition of the interest in the trust the amount worked out by using the formula:

Cost of a share   ×   Number of shares

(b) to have paid that amount, and to have acquired the interest, on the demutualisation resolution day.

326-200(3)    
In the formula in paragraph (2)(a):

cost of a share
means the amount that would have been taken to have been paid by the member for the acquisition of a share in the demutualised entity under Subdivisions 326-D , 326-E and 326-F if the disposal had been the disposal of the shares to which the interest or the part of the interest in the trust related.

number of shares
means the number of shares in the demutualised entity to which the interest in the trust related.

326-200(4)    
If the member is a pre-CGT member who did not acquire membership rights in the demutualising entity by disposing of membership rights in another mutual entity, any capital loss made from the disposal before the demutualisation listing day, or, if there is no such day, before the day on which the shares in the demutualised entity were issued, is to be disregarded.