Income Tax Assessment Act 1936

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

Division 326 - DEMUTUALISATION  

Subdivision 326-E - CGT consequences of disposal of demutualisation shares or interests in such shares by a member of a mutual entity where the entity or a holding company of the entity becomes a company that is not a listed public company  

SECTION 326-160   DISPOSAL BY PRE-CGT MEMBER OF A DEMUTUALISATION ORIGINAL SHARE OR A NON-DEMUTUALISATION BONUS SHARE, OR AN INTEREST IN SUCH A SHARE, WHERE MEMBER ACQUIRED MEMBERSHIP RIGHTS BY DISPOSING OF MEMBERSHIP RIGHTS IN ANOTHER MUTUAL ENTITY  

326-160(1)    
If:

(a) the disposal is a disposal of either:

(i) a demutualisation original share or an interest in such a share; or

(ii) a non-demutualisation bonus share or an interest in such a share; and

(b) the disposer acquired membership rights in the demutualising entity by disposing of membership rights in another mutual entity; and

(c) the disposer is a pre-CGT member;

then, for the purpose of working out whether the disposer made a capital gain or capital loss from the disposal, the following paragraphs have effect:

(d) for the purpose of applying Subdivision 130-A of the Income Tax Assessment Act 1997 , the amount paid for the acquisition of all the demutualisation original shares that is to be taken into account under that Division or Subdivision, as the case may be, is taken to be both of the following amounts:

(i) the amount worked out by using the formula:

Undeducted membership costs

+

Adjusted market value   Number of members

(ii) any amount actually paid for the acquisition; and

(e) if the disposal is a disposal of a demutualisation original share or an interest in such a share, the disposer is taken to have done the following:

(i) to have paid the amount referred to in subparagraph (d)(i) on the demutualisation resolution day;

(ii) to have paid any amount referred to in subparagraph (d)(ii) when it was actually paid;

(iii) to have acquired the share or interest on the demutualisation resolution day.

326-160(2)    
In the formula in subparagraph (1)(d)(i):

number of members
means the total number of members of the other mutual entity at the time of the disposal of the membership rights in that entity.