Demerger relief rules: What constitutes a “restructuring”?

Published on 01 Oct 20 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

With the release of TD 2020/6 and the accompanying public advice and guidance compendium, TD 2020/6EC, the A TO has finalised its position regarding the meaning of the word “restructuring” for the purposes of s 125-70(1) ITAA97 in the demerger relief rules. As expected, the ATO has maintained the views previously expressed in TD 2019/D1, which have been criticised for not reflecting the policy objectives of the demerger relief rules. The ATO does not accept that its interpretation of the demerger relief rules has become more restrictive, yet considers the new guidance should provide more transparency, consistency and clarity around the ATO’s views of demerger relief. Absent a legislative fix, the authors expect that TD 2020/6 will make it more difficult to obtain demerger relief in all but the most plain and vanilla demerger transactions in the future, impeding transaction structures that would otherwise facilitate commercial objectives such as capital raisings.

Author profiles

Cameron Blackwood ATI

Cameron Blackwood, ATI, is the Head of Tax at Corrs and is a leading transactional tax expert, specialising in mergers, acquisitions, and restructures. Having advised several of Australia’s largest taxpayers, Cameron’s expertise includes cross-border issues and all aspects of employee share schemes. He has significant experience acting for public and private companies on capital management, including capital raising, return of capital, special dividends and buy-backs and debt raisings. He regularly presents at The Tax Institute and the Corporate Tax Association on M&A, management incentive plans and international tax issues and demergers. Cameron has been recognised as a leading lawyer by legal directories and publications including Chambers, The Legal 500 Asia Pacific and Best Lawyers for Tax in Australia. - Current at 30 May 2024

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• The expanding offshore client – How Australian tax rules are taken with you and how to manage them paper - 25-May-2017
• New employee share scheme rules: SME startups paper - 02-June-2016
• Capital management - 01-June-2014
• Capital management paper - 22-May-2014
• Workshop one - Outbound investment paper - 27-October-2011
• An update on reform of the outbound investment rules - 01-April-2011
• An update on reform of the outbound investment rules paper - 02-March-2011
• Reform of the anti-tax deferral rules: An update - 01-August-2010
• Tax Case: No room at the inn - 01-February-2005

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Alistair Haskett CTA

Alistair is a Senior Associate in the Melbourne office of Greenwoods & Herbert Smith Freehills. Alistair advises on a wide range of tax matters in the context of mergers and acquisitions, privatisations, projects and disputes across various industry sectors including infrastructure, financial services and property. - Current at 30 August 2021

More by Alistair Haskett

• After the deluge: mopping up the general principles of taxation for landlords and tenants paper - 04-November-2021
• The proposed debt and equity amendments: Improvements or more uncertainty? - 01-February-2017

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