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Has the ATO created a demergency?

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Published on 01 Oct 20 by "THE TAX SPECIALIST" JOURNAL ARTICLE

This article considers the ATO’s views on the meaning of the term “restructuring” in the context of the demerger tax rules. As explained in the article, the ATO’s interpretation is inconsistent with the long line of Australian and English cases that construe the related words “reconstruction” and “reorganisation”, the evident (and express) object of the demerger tax rules, the context in which the term appears and the broader structure of the tax legislation. Despite the evident deficiencies in the ATO’s views, the practical reality for public market demerger transactions is that the ATO’s interpretation of the law is, for all intents and purposes, the law. The need for legislative intervention is clear, and the ongoing review by the Board of Taxation of capital gains tax roll-overs provides an opportune setting for independent review and rectification.

Author profiles

Joseph Power
Joe is a Partner in Allens’ tax practice. A tax law specialist, he advises on a range of income tax and stamp duty issues associated with corporate mergers, acquisitions and restructures, capital raisings and international tax, particularly for private equity, corporate and funds clients. Joe’s experience includes: funds – advising investors and trustees in fund structures, including advising offshore asset managers on structuring of investments in Australia; private equity – advising private equity funds regularly on a range of transactions; M&A – regularly advising on corporate acquisitions, disposals and restructures; resources – advising resources clients on strategic investments; disputes and litigation – advising large multinational resourcing clients on their mining royalty audits and litigation. Joe is a member of the Income Tax Committee on the Property Council of Australia. He is also a member of the editorial panel of (and a contributor to) the Australian Tax Law Bulletin. - Current at 20 July 2022
Jay Prasad ATI
Jay is a Senior Associate in the tax group at Allens. Jay routinely advises on the income tax aspects of transactions and on tax disputes. He is particularly experienced in advising clients on large infrastructure projects and cross border investments. - Current at 13 January 2023
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