TABLE OF CONTENTS


Background

  • When the tax ruling says partial - that just means that in the event that you receive a combination of NEW shares AND cash consideration, you must pro rata the two when splitting the cost base of the OLD shares.
  • Clauses about choosing scrip for scrip rollover generally consist of
    • disregarding CGT event of receiving replacement new shares for the disposal of your old shares
    • the cash proceeds capital gain event formula is:
      • cg event = cash proceed - ineligible proceeds cost base
    • the formula for new shares being sold is:
      • cg event new shares = whatever market value of new shares you sold it for - eligible proceeds cost base

  • Generally clauses about if you cannot choose scrip for scrip roll-over for for non-residents
    • and in most cases it means you have to do a CGT event A1 for the old shares being disposed
    • and that the cost base and reduced cost base method continues to apply in that
      • cash consideration IS NOT included in the cost base or reduced cost base of replacement new shares
      • the date of acquisition of the replacement new shares is the implementation date, not the date of when theold shares were acquired


CR 2018/6 - Tatts Group Limited Scheme of Arrangement and payment of Special Dividend







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CR 2023/9 - Pendal Group Limited - dividend and scheme of arrangement

If you choose scrip for scrip roll-over

Capital gain partially disregarded

33. If you choose scrip for scrip roll-over, the capital gain you made from the disposal of your Pendal share is disregarded to the extent that you received replacement Perpetual shares for the disposal of your Pendal shares (eligible proceeds) (subsection 124-785(1)).
34. The capital gain made from the disposal of a Pendal share is not disregarded to the extent that you received cash for the disposal of your Pendal share (ineligible proceeds) (subsection 124-790(1)).


In other words, there is a capital gain event for the cash consideration you received ($1.615)


Cost base and reduced cost base of your replacement Perpetual Limited share

35. If you choose scrip for scrip roll-over, the first element of the cost base and reduced cost base of each replacement Perpetual share received is worked out by reasonably attributing to it the cost base of your original Pendal shares for which it was exchanged (subsections 124-785(2) and 124-785(4)). Any part of the cost base of the Pendal shares you exchanged that relates to the receipt of cash consideration is not included in the cost base of the Perpetual shares (subsection 124-785(3)).


36. For the purpose of determining whether a capital gain made from any later disposal of a Perpetual share is a discount capital gain, if you choose scrip for scrip roll-over, you are taken to have acquired your Perpetual share when you acquired your original Pendal shares that were exchanged for the relevant Perpetual share (table item 2 of subsection 115-30(1)).


116. Therefore, the capital proceeds you received from CGT event A1 happening on the disposal of your Pendal shares consists of:

  • $1.615 cash ($1.650 less the dividend of $0.035) you received for each Pendal share and
  • the scrip consideration, being the market value (worked out at the time CGT event A1 happened) of the replacement Perpetual shares you received.

117. For the purposes of determining the market value of a Perpetual share for the capital proceeds as required by subsection 104-10(3), the Commissioner accepts that the market value of a Perpetual share on the Implementation Date was $26.611.

 

121. If you make a capital gain from the disposal of your Pendal share, you are eligible to treat the capital gain as a discount capital gain provided that:

•
you are an individual, a complying superannuation entity or, subject to the rules in Subdivision 115-C, a trust (section 115-10)
•
the capital gain was worked out using a cost base that was calculated without reference to indexation (subsection 115-20(1)), and
•
you acquired, or were taken to have acquired, your Pendal share on or before 22 January 2022, which was at least 12 months prior to CGT event A1 happening (subsection 115-25(1)).


128. If you choose partial scrip for scrip roll-over, the capital gain you made from the disposal of a Pendal share is disregarded to the extent you received replacement Perpetual shares for the disposal of your Pendal share (eligible proceeds) (subsection 124-785(1)). The capital gain is not disregarded to the extent that you received cash consideration for the disposal of your Pendal share (ineligible proceeds).


129. Subsection 124-790(2) provides that the cost base (or reduced cost base) of the ineligible proceeds is that part of the cost base of the original interest as is reasonably attributable to the ineligible proceeds. The cost base of each Pendal share is, for the purpose of working out the cost base of the replacement Perpetual shares, reduced by that part of the cost base which is reasonably attributable to the cash consideration of $1.615.


130. The method to be used by a Pendal shareholder to calculate that part of the cost base of each Pendal share that is not reasonably attributable to the cash consideration of $1.615 (eligible proceeds cost base) is:



131. The method to be used by a Pendal shareholder to calculate that part of the cost base of each Pendal share that is reasonably attributable to the cash consideration of $1.615 (ineligible proceeds cost base) is:


132. In working out the amount of the capital gain that is subject to scrip for scrip roll-over, the following method may be applied:

Capital gain (roll-over) = Market value of Perpetual shares (of when you sell it) - Eligible proceeds cost base

133. In working out the amount of the capital gain that is not subject to scrip roll-over, the following method may be applied:

Capital gain = $1.615 - Ineligible proceeds cost base

In the class ruling its 26.611


Consequences if partial scrip for scrip roll-over is not chosen, or cannot be chosen

134. If you do not, or cannot, choose scrip for scrip roll-over, any capital gain made from the disposal of a Pendal share is not disregarded and any capital gain or capital loss you make from CGT event A1 happening on the disposal of your Pendal shares must be taken into account in working out your net capital gain or net capital loss for the income year (sections 102-5 and 102-10).


135. If you do not, or cannot, choose scrip for scrip roll-over, the first element of the cost base and reduced cost base of each replacement Perpetual share received is equal to the part of the market value of the Pendal shares reasonably attributable to the Perpetual share at the time of its acquisition (paragraph 110-25(2)(b) and subsection 110-55(2)). The market value of a Pendal share given by you that is reasonably attributable to the receipt of cash consideration is not included in the cost base or reduced cost base of a replacement Perpetual share (subsection 112-30(1)).


Example





The ratio was 94 : 6 for cost base of old shares. Of which 

  • 94.2783% will go to new reduced cost base for new shares
  • 5.7217% goes to cgt event for cash consideration


Say  Pendal shares costed $9310.55 for 1126 units, thus being $8.27 per unit. Then its

  • Eleigble cost base $8.27 x 94.2786% = $7.80
  • Ineligible cost base = $8.27 x 5.7217% = $0.47


Thus 

  • PPT new cost base 
    • $7.80 x 1126 pendal units  / 161 ppt units 
    • $8782.80 / 161 ppt units = $54.55 per ppt unit
  • Ineligble proceeds capital gains 
    • ($1.615 - 0.47) x 1126 units
    • = $1818.49 - $529.22 = $1,289.27


CR 2022/43 - Class Limited - partial scrip for scrip roll-over