Ann: ATO Class Ruling on In-specie Distribution of TRT Shares, page-4

OK I will give it a go...

Firstly, I know tax from a UK and a NZ perspective but not really from an Australian perspective…. So don’t take the following as being 100% accurate in any way & seek professional advice before acting or not acting on anything below……

From a quick read through it appears that on the demerger of TRR from TNG a capital reduction in TNG occurred to the value of $0.0043 for each TNG share (think of this as a distribution per share of income from TNG). Because the capital reduction may be more than the equivalent reduction in the cost of your TNG shares you may have to account for capital gains (tax) on the difference if the county you are a tax resident of has capital gains tax (Australia and UK for example do, but not generally not NZ).

The question is how to work out if you have a capital gain?

When the demerger of TRR occurred the ”value” of TNG reduced by the value of TRR and ATO indicate that the reduction of TNG’s market value at the time of the demerger was 5.2%. So, if you bought TNG shares before the demerger for $100 the new “base” cost of your TRR shareholding will be $5.20 and the “reduced base” cost of your TNG share will be $94.80.

As ATO indicate a capital reduction of $0.0043 for each per TNG share, if the value of the total capital reduction you are deemed to have received exceeds the reduced 5.2% “cost” of your TNG shares you have a capital gain which may be taxable. Using the basic example above the reduction in the cost of your TNG shares would be $5.20, so if you had 2,000 shares in TNG then you received a capital reduction of TNG of $8.60, being 2,000 x $0.0043, because this is more than the reduction in cost of your TNG shares you need to account for a net gain of $3.40 ($8.60 less $5.20) upon which you may need to pay tax. If you have a net loss ATO indicate you can’t claim this.

ATO indicate that you can claim to “roll-over” any net gain into your TRR shares. This means the cost of your TRR shares are reduced by the gain. So, using the examples above, the cost of TRR of $5.20 is reduced by $3.40 and when you come to sell those share the cost will be reduced to $1.80 ($5,20 - $3.40).

Do note this is only what I have gleaned from a quick read of the document and it may, therefore, be a load of rubbish; always seek professional advice first….