Capital gains tax: demergers - assets which cannot be demerged

Can the transfer of assets which are not ownership interests in an entity constitute a demerger for the purposes of Division 125 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. The transfer of assets which are not ownership interests in an entity cannot constitute a demerger for the purposes of Division 125 of the ITAA 1997.

A company transferred business assets (which were not ownership interests in another entity) to its shareholders.

The transfer of assets which are not ownership interests in an entity cannot satisfy the conditions for a demerger in Division 125 of the ITAA 1997. Section 125-70 of the ITAA 1997 requires, inter alia, that the owners of ownership interests in the head entity of a demerger group receive ownership interests in a demerged entity under the demerger. [Note: A transfer of ownership interests in an entity is not necessarily a demerger for the purposes of Division 125. There are a number of other conditions which must be satisfied.]