Issue
Can the trustee of a discretionary trust choose a rollover under section 125-55 of the Income Tax Assessment Act 1997 (ITAA 1997) for a CGT event happening to the trust's original interests under a demerger which satisfies the conditions of Division 125 of the ITAA 1997?
Decision
Yes. The trustee of a discretionary trust can choose a rollover under section 125-55 of the ITAA 1997 for a CGT event happening to the trust's original interests under a demerger which satisfies the conditions of Division 125 of the ITAA 1997.
Facts
An Australian resident discretionary trust owned shares in a listed company.
The listed company undertook a demerger of its subsidiary which satisfied the conditions of Division 125 of the ITAA 1997.
This demerger caused a CGT event to happen to the trust's shares in the listed company.
Reasons for Decision
Subsection 125-65(2) of the ITAA 1997 prevents a discretionary trust from being a member of a demerger group, but that provision is not relevant as to whether the trust, as an owner of ownership interests in the head entity of the group, is entitled to choose a rollover under section 125-55 of the ITAA 1997.
An entity can choose a rollover under section 125-55 provided that it satisfies the conditions of that section. No condition of that section precludes any particular type of entity from choosing the rollover.