(b) if the disposer is a post‑CGT member, the sum of:
(i) the undeducted amounts of the costs that were incurred by the disposer in acquiring and maintaining membership in the other entity; and
(ii) the undeducted amounts of the costs that were incurred by the disposer in maintaining membership in the demutualising entity;
less any distributions that:
(iii) were made by the demutualising entity or the other entity to the disposer before any shares in the demutualised entity were issued; and
(iv) were not included in the disposer’s assessable income of any year of income.
(3) If at any time 2 or more persons were joint members of a mutual entity, any costs incurred by any one or more of them in acquiring or maintaining the joint membership are taken to have been incurred by each of them.
(4) Subject to subsection (5), the undeducted amount of a cost is the amount of the cost to the extent to which a deduction has not been allowed, and is not allowable, in respect of it.
(5) If:
(a) an amount of a cost referred to in subsection (1) or (2) was incurred before the demutualisation resolution day; and
(b) the indexation factor (see section 326‑235) of the amount is more than one;
a reference in this section to the undeducted amount of that cost is a reference to the undeducted amount as indexed under Subdivision 326‑M.
Subdivision 326‑F—Variation of amount taken to be paid for shares or an interest in shares by a member of a mutual entity who made a capital gain or capital loss from disposal of membership rights in another mutual entity
Table of sections
326‑180 Amount taken to be paid for acquisition of shares or interest by member to be increased by capital gain or reduced by capital loss
326‑180 Amount taken to be paid for acquisition of shares or interest by member to be increased by capital gain or reduced by capital loss
(1) This section applies if:
(a) a post‑CGT member of a mutual entity that has been demutualised acquired membership rights in the entity by the disposal of membership rights in another mutual entity; and
(b) the member made a capital gain or capital loss from the disposal of membership rights in the other mutual entity; and
(c) the member has acquired shares or an interest in shares in the demutualised entity or in a company that holds shares in the demutualised entity.
(2) If the member disposes of a demutualisation original share or a non‑demutualisation bonus share, the amount paid for the acquisition of all the demutualisation original shares is taken to be increased by the amount of the capital gain or reduced by the amount of the capital loss, as the case may be.
(3) If subsection (2) does not apply, the amount that is taken, under Subdivision 326‑D or 326‑E, to have been paid by the member for the acquisition of the share or interest is taken to be increased by the proportionate part of the amount of the capital gain or reduced by the proportionate part of the amount of the capital loss, as the case may be.
Subdivision 326‑G—CGT consequences of disposal of rights or interests resulting from extinguishment of membership rights
Table of sections
326‑185 Disposal of right to receive shares in demutualised entity
326‑190 Extinguishment of right to shares in demutualised entity by the issue of the shares
326‑195 Disposal of right to receive shares in holding company
326‑200 Disposal of interest in trust that holds shares in demutualised entity
326‑185 Disposal of right to receive shares in demutualised entity
(1) This section applies if:
(a) under the direct method of demutualisation, or the combined direct and holding company method of demutualisation, of a mutual entity, the membership rights of an existing member of the entity are extinguished; and
(b) as a result of the extinguishment of the rights, the member acquires a right or an interest in a right to have shares in the demutualised entity issued to the member; and
(c) the member disposes of the whole or a part of the right or interest otherwise than by receiving the shares.
(2) For the purpose of working out whether the member made a capital gain or capital loss from the disposal, the member is taken to have done the following:
(a) to have paid for the acquisition of the right or interest in the right the amount worked out by using the formula:
Start formula Cost of a share or interest times Number of shares end formula
(b) to have paid that amount, and to have acquired the right or interest, on the demutualisation resolution day.
(3) In the formula in paragraph (2)(a):
cost of a share or interest means the amount that would have been taken to have been paid by the member for the acquisition of a share or an interest in a share in the demutualised entity under Subdivisions 326‑D, 326‑E and 326‑F if the disposal had been the disposal of the shares to which the right or interest in the right related.
number of shares means the number of shares to which the right or interest in the right related.
(4) If the member is a pre‑CGT member who did not acquire membership rights in the demutualising entity by disposing of membership rights in another mutual entity, any capital loss made from the disposal before the demutualisation listing day, or, if there is no such day, before the day on which the shares in the demutualised entity were issued, is to be disregarded.
326‑190 Extinguishment of right to shares in demutualised entity by the issue of the shares
(1) If, under the direct method of demutualisation or the holding company method of demutualisation, shares in a demutualised entity are issued to an existing member, Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 do not apply in respect of any CGT event constituted by the extinguishment of the member’s right to have the shares issued to the member.
(2) If, under the combined direct and holding company method of demutualisation, shares in a demutualised entity or in a holding company are issued to an existing member, Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 do not apply in respect of any CGT event constituted by the extinguishment of the member’s rights to have the shares issued to the member.
326‑195 Disposal of right to receive shares in holding company
(1) This section applies if:
(a) under the holding company method of demutualisation, or the combined direct and holding company method of demutualisation, of a mutual entity:
(i) the membership rights of an existing member of the entity are extinguished; and
(ii) shares in the demutualised entity are issued to a company (the holding company); and
(b) as a result of the extinguishment of the rights, the member acquires a right or an interest in a right to have shares in the holding company issued to the member; and
(c) the member disposes of the whole or a part of the right or interest otherwise than by receiving the shares.
(2) For the purpose of working out whether the member made a capital gain or capital loss from the disposal, the member is taken to have done the following:
(a) to have paid for the acquisition of the right or interest in the right the amount worked out by using the formula:
Start formula Cost of a share or interest times Number of shares end formula
(b) to have paid that amount, and to have acquired the right or interest, on the demutualisation resolution day.
(3) In the formula in paragraph (2)(a):
cost of a share or interest means the amount that would have been taken to have been paid by the member for the acquisition of a share or an interest in a share in the holding company under Subdivisions 326‑D, 326‑E and 326‑F if the disposal had been the disposal of the shares in the holding company to which the right or interest in the right related.
number of shares means the number of shares in the holding company to which the right or interest in the right related.
(4) If the member is a pre‑CGT member who did not acquire membership rights in the demutualising entity by disposing of membership rights in another mutual entity, any capital loss made from the disposal before the demutualisation listing day, or, if there is no such day, before the day on which the shares in the holding company were issued, is to be disregarded.
326‑200 Disposal of interest in trust that holds shares in demutualised entity
(1) This section applies if:
(a) under the distributing trust method of demutualisation of a mutual entity:
(i) the membership rights of an existing member of the entity are extinguished; and
(ii) shares in the demutualised entity are issued to a trustee; and
(b) as a result of the extinguishment of the rights, the member acquires an interest in the trust constituted by the right to have shares in the demutualised entity held by the trustee transferred by the trustee to the member or disposed of by the trustee on behalf of the member; and
(c) the member disposes of the whole or a part of the interest otherwise than by receiving the shares or proceeds of the sale of the shares.
(2) For the purpose of working out whether the member made a capital gain or capital loss from the disposal, the member is taken to have done the following:
(a) to have paid for the acquisition of the interest in the trust the amount worked out by using the formula:
Start formula Cost of a share times Number of shares end formula
(b) to have paid that amount, and to have acquired the interest, on the demutualisation resolution day.
(3) In the formula in paragraph (2)(a):
cost of a share means the amount that would have been taken to have been paid by the member for the acquisition of a share in the demutualised entity under Subdivisions 326‑D, 326‑E and 326‑F if the disposal had been the disposal of the shares to which the interest or the part of the interest in the trust related.
number of shares means the number of shares in the demutualised entity to which the interest in the trust related.
(4) If the member is a pre‑CGT member who did not acquire membership rights in the demutualising entity by disposing of membership rights in another mutual entity, any capital loss made from the disposal before the demutualisation listing day, or, if there is no such day, before the day on which the shares in the demutualised entity were issued, is to be disregarded.
Subdivision 326‑H—CGT consequences of transfer of ordinary shares
Table of sections
326‑205 Transfer of share or distribution of proceeds of sale of share not to have any CGT consequences
326‑205 Transfer of share or distribution of proceeds of sale of share not to have any CGT consequences
If a trustee transfers an ordinary share or distributes the proceeds of the sale of an ordinary share as mentioned in subparagraph 326‑55(1)(h)(ii), Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 do not apply in respect of any CGT event constituted by or arising from the transfer or distribution.
Subdivision 326‑I—CGT consequences of disposal of demutualisation shares or an interest in such shares by a trustee on behalf of a member
Table of sections
326‑210 Disposal by a trustee
326‑210 Disposal by a trustee
If:
(a) under the distributing trust method of demutualisation, shares in a demutualised entity are issued to a trustee on behalf of a member; and
(b) the trustee disposes of a share or an interest in a share, or disposes of a non‑demutualisation bonus share or an interest in such a share, on behalf of the member;
the disposal is taken for the purposes of Subdivisions 326‑D, 326‑E and 326‑F to have been a disposal of the share or interest by the member.
Subdivision 326‑J—CGT consequences of change in rights attaching to special shares or replacement of special shares by ordinary shares
Table of sections
326‑215 Change of rights to, and replacement of, special shares
326‑215 Change of rights to, and replacement of, special shares
(1) This Subdivision applies where, under the distributing trust method of demutualisation of a mutual entity, the rights attaching to special shares issued to a trustee on behalf of a member become the same as the rights attaching to ordinary shares.
(2) Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 do not apply in respect of the change in rights.
Subdivision 326‑K—CGT consequences of disposal of shares or an interest in shares acquired under a roll‑over provision
Table of sections
326‑220 Disposal of shares or interest in shares
326‑220 Disposal of shares or interest in shares
(1) This section applies where:
(a) under any method of demutualisation, a mutual entity, or a holding company of a mutual entity, becomes a listed public company; and
(b) a disposal of a share, or of an interest in a share, in the entity or holding company takes place before the demutualisation listing day; and
(c) a roll‑over provision applies to the disposal; and
(d) the person who disposed of the share or interest would, except for section 326‑75 and paragraph (c) of this subsection, have made a capital loss as a result of the disposal; and
(e) the person who is taken to acquire the share or interest under the roll‑over provision (the transferee) disposes of the share or interest.
(2) If the disposal by the transferee takes place before the demutualisation listing day, any capital loss that the transferee makes from that disposal is disregarded.
(3) If the disposal by the transferee takes place on or after the demutualisation listing day, Subdivision 326‑D applies to the disposal referred to in paragraph (1)(b) as if that disposal had taken place on or after that day.
(4) In this section:
disposal includes a disposal that would have occurred except for former section 160X.
roll‑over provision means:
(a) former section 160X; or
(b) any provision of Division 17 of Part III; or
(c) Division 128 of the Income Tax Assessment Act 1997; or
(d) any provision of Divisions 122 and 126 of Part 3‑3 of the Income Tax Assessment Act 1997.
Subdivision 326‑L—CGT consequences of payment to member of demutualised entity out of accumulated surplus of the entity
Table of sections
326‑225 Payment out of assets of demutualised entity that is not included in assessable income is taken not to be a dividend
326‑225 Payment out of assets of demutualised entity that is not included in assessable income is taken not to be a dividend
If:
(a) a payment out of the assets of a demutualised entity is made to a taxpayer who holds shares or an interest in shares in the entity; and
(b) the amount paid is a dividend that is not included in the taxpayer’s assessable income;
the payment is taken, for the purposes of section 104‑135 of the Income Tax Assessment Act 1997, not to be the payment of a dividend.
Subdivision 326‑M—Indexation
Table of sections
326‑230 Indexing of amounts
326‑235 Indexation factor
326‑240 Index number
326‑230 Indexing of amounts
Some provisions of this Division require amounts to be indexed. An amount is indexed by multiplying it by its indexation factor.
326‑235 Indexation factor
(1) For the indexation of the amount worked out under subsection 326‑120(2) or 326‑170(6) in relation to a person who acquired membership rights in a demutualising entity by the disposal of membership rights in another mutual entity, the indexation factor is:
Start formula start fraction Index number for the quarter in which the relevant demutualisation resolution day occurred over Index number for the quarter in which the membership rights in the other mutual entity were disposed of end fraction end formula
(2) For the indexation of an undeducted amount referred to in subsections 326‑125(1) and (2) or 326‑175(1) and (2) of a cost incurred by a person in acquiring or maintaining membership in a demutualising entity or another entity, the indexation factor is:
Start formula start fraction Index number for the quarter in which the relevant demutualisation resolution day occurred over Index number for the quarter in which the cost was incurred end fraction end formula
(3) An indexation factor is to be worked out to 3 decimal places (rounding up if the fourth decimal place is 5 or more).
326‑240 Index number
(1) The index number for a quarter is the All Groups Consumer Price Index number (being the weighted average of the 8 capital cities) first published by the Australian Statistician for the quarter.
(2) If the Australian Statistician changes the index reference period for an index number, only index numbers published in terms of the new index reference period are to be used after the change.
Subdivision 326‑N—Non‑CGT consequences of issue of demutualisation shares
Table of sections
326‑245 General taxation consequences of issue of demutualisation shares
326‑245 General taxation consequences of issue of demutualisation shares
If any demutualisation shares are issued to a taxpayer under any method of demutualisation, no amount is to be included in the taxpayer’s assessable income because of the issue of the shares to the taxpayer.
Commonwealth Coat of Arms of Australia
Income Tax Assessment Act 1936
No. 27, 1936
Compilation No. 190
Compilation date: 1 January 2026
Includes amendments: Act No. 9, 2025
This compilation is in 7 volumes
Volume 1: sections 1‑78A
Volume 2: sections 79A‑121L
Volume 3: sections 124ZM‑204
Volume 4: sections 251R‑468
Volume 5: Schedules
Volume 6: Endnotes 1‑4
Volume 7: Endnote 5
Each volume has its own contents
About this compilation
This compilation
This is a compilation of the Income Tax Assessment Act 1936 that shows the text of the law as amended and in force on 1 January 2026 (the compilation date).
The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.