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SME demergers and capital returns
Published on 01 Oct 18 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE
The ATO interpretation of the demerger rules has effectively put them beyond the reach of the vast majority of SME companies. This raises the questions: do the new small business roll-over rules (SBRR) provide an alternative means of achieving a similar outcome? Or of undertaking other share capital dealings in a more flexible manner than provided for by Div 16K of the Income Tax Assessment Act 1936? This article examines demerger relief, when SMEs satisfy the ATO tests, whether the SBRR allows an effective tax-free demerger and whether the safe harbour rules apply. The authors’ views are that a change of view from the ATO might be forthcoming to allow SMEs to utilise the SBRR and demerger provisions as freely as they use scrip-for-scrip transactions.
Author profiles
John Middleton CTA
John Middleton, CTA, is part of the ATO’s Tax Counsel Network, where he works on complex technical advice, tax reform projects, and strategic litigation. He also worked in Policy and Law Design within the ATO. Prior to this, he had over 20 years in the private sector at Clayton Utz Brisbane specialising in revenue and commercial law. He practised in CGT, stamp duty, GST and general tax, as well as trust and corporate law. While in private practice John was listed in Doyle’s and Best Lawyers in respect of revenue law matters. - Current at 11 September 2025
Christine PALMER
The Tax Institute is Australia's leading professional association and educator in tax providing the best resources, professional development and networks.