Symbio Holdings Limited - scrip for scrip roll-over and special dividend

This Ruling sets out the income tax consequences for the holders of ordinary shares in Symbio Holdings Limited (Symbio) in relation to the payment of a special dividend by Symbio on 28 February 2024 (Special Dividend) and the acquisition of all the ordinary shares in Symbio by Aussie Broadband Limited (ABB) on 28 February 2024 (Implementation Date).

Details of this scheme are set out in paragraphs 59 to 96 of this Ruling.

All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated.

This Ruling applies to you if you: • were a holder of an ordinary share in Symbio on 21 February 2024 (Scheme Record Date) • were either a - resident of Australia (as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)) and not a temporary resident (as defined in subsection 995-1(1)), or - non-resident (as defined in subsection 6(1) of the ITAA 1936) other than a non-resident who carries on a business at or through a permanent establishment in Australia • held your Symbio shares on capital account – that is, your Symbio shares were neither held as revenue assets (as defined in section 977-50) nor as trading stock (as defined in subsection 995-1(1)), and • received the Special Dividend (which was paid by Symbio on 28 February 2024).

Paragraphs 8 to 27 of this Ruling also apply to you if the Special Dividend flows to you indirectly through a partnership or trust.

This Ruling does not apply to you if you: • are an exempt entity (as defined in subsection 995-1(1)) • are subject to the investment manager regime in Subdivision 842-I • acquired your Symbio shares under an employee share scheme (as defined in section 83A-10), or • are subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme described in paragraphs 59 to 96 of this Ruling. Note: Division 230 will not apply to individuals unless they have made an election for it to apply.

This Ruling applies from 1 July 2023 to 30 June 2024.

The Special Dividend is a 'dividend' as defined in subsection 6(1) of the ITAA 1936.

If you are a resident of Australia and you received the Special Dividend, your assessable income for the income year in which you received the Special Dividend includes 35 cents in respect of each Symbio share (subparagraph 44(1)(a)(i) of the ITAA 1936).

Additionally, in the income year in which you received the Special Dividend (subject to you being a 'qualified person' in relation to the Special Dividend), if you are not a partnership or trustee of a trust to whom a franked distribution is made (except a corporate tax entity or a trustee of a trust that is a complying superannuation entity), and if you are not an entity to whom a franked distribution flows indirectly, you will: • have to include the franking credit on the Special Dividend in your assessable income (subsection 207-20(1)), and • be entitled to a tax offset equal to the franking credit on the Special Dividend (subsection 207-20(2)).

If you received the Special Dividend as a partnership or as the trustee of a trust (and if you are not a corporate tax entity or a complying superannuation entity), and if you are a qualified person in relation to the Special Dividend, your assessable income includes the franking credit on the Special Dividend (subsection 207-35(1)).

If you are a resident of Australia and the Special Dividend flows to you indirectly as a partner in a partnership or as a beneficiary of a trust, you will, in the income year in which the Special Dividend flows indirectly to you: • have to include your share of the net income of the partnership (worked out under Division 5 of Part III of the ITAA 1936) or the net income of the trust (worked out under Division 6 of Part III of the ITAA 1936) in your assessable income • have to include your share of the franking credit on the Special Dividend in your assessable income (subsections 207-35(3) and (4) and section 207-37), provided both you and the partnership or trust (as relevant) are each a qualified person (former subsection 160APHU(1) of the ITAA 1936), and • be entitled to a tax offset equal to your share of the franking credit on the Special Dividend (section 207-45), provided both you and the partnership or trust (as relevant) are each a qualified person (former subsection 160APHU(1) of the ITAA 1936).

Your entitlement to the franking credit tax offset under Division 207 in relation to the Special Dividend is subject to the refundable tax offset rules in Division 67, provided you are not excluded by the operation of section 67-25.

Paragraph 207-145(1)(a) refers to Division 1A of former Part IIIAA of the ITAA 1936, which contains the conditions you must satisfy to be a qualified person in relation to a franked distribution you have received. The main way in which you can be a qualified person is by satisfying the holding period rule.

Paragraph 207-150(1)(a) applies in a corresponding way to a franked distribution which flows indirectly to you through a partnership or trust.

The Special Dividend constitutes a 'related payment' for the purposes of former section 160APHN of the ITAA 1936. This is because the Scheme Consideration paid by ABB for acquiring the Symbio shares is reduced by the amount of the Special Dividend. This reduction has the effect of passing the benefit of the Special Dividend from the shareholders of Symbio to ABB (former subsection 160APHN(2), former paragraphs 160APHN(3)(f), 160APHN(4)(c) and (d) of the ITAA 1936).

Therefore, you are taken to have made a related payment in respect of the Special Dividend.

You will satisfy the holding period rule in relation to the Special Dividend if you held your Symbio shares (or your interest in Symbio shares held through a partnership or trust, as defined in former subsection 160APHG of the ITAA 1936) for a continuous period of at least 45 days during the secondary qualification period for the Special Dividend (former paragraph 160APHO(1)(b) and former subsection 160APHO(2) of the ITAA 1936).

The secondary qualification period begins on the 45th day before, and ends on the 45th day after, the day on which the shares became ex dividend (former section 160APHD of the ITAA 1936).

Former subsection 160APHE(1) of the ITAA 1936 states that a share in respect of which a dividend is to be paid, or an interest in such a share, becomes ex dividend on the day after the last day on which the acquisition by a person of the share will entitle the person to receive the dividend.

In relation to the Special Dividend, the Symbio shares (or an interest in Symbio shares) became ex dividend on 20 February 2024.

Therefore, you will satisfy the holding period rule in relation to the Special Dividend if, during the period from 6 January 2024 to 20 February 2024 (inclusive), you held each of your Symbio shares or your interest in Symbio shares for a continuous period of at least 45 days (not counting the day on which you acquired the Symbio share or interest, or the day on which you disposed of the Symbio share or interest, and not counting the days, if any, on which you had 'materially diminished risks of loss or opportunities for gain' (as defined in former section 160APHM of the ITAA 1936) in respect of the Symbio share or interest).

You had materially diminished risks of loss or opportunities for gain on and after 21 February 2024 (the Scheme Record Date), when you became committed to disposing of your shares in Symbio in exchange for the Scheme Consideration. Therefore, the secondary qualification period for the Special Dividend ended on 20 February 2024.

As Symbio was not an exempting entity (section 208-20) or a former exempting entity (section 208-50) at the time when it paid the Special Dividend to you, section 208-195 will not apply to prevent the inclusion in your assessable income of the amount of the franking credit on the Special Dividend you received, nor to deny the franking credit tax offset to which you are otherwise entitled, under Division 207.

The Commissioner will not make a determination under paragraph 177EA(5)(b) of the ITAA 1936 to deny the whole, or any part, of the imputation benefits you received in relation to the Special Dividend. This is because it cannot be concluded that Symbio or the shareholders of Symbio entered into or carried out the scheme for a more than incidental purpose of enabling the shareholders of Symbio to obtain an imputation benefit, and accordingly the purpose requirement in paragraph 177EA(3)(e) of the ITAA 1936 is not satisfied.

As there is no streaming of distributions, the Commissioner will not make a determination under subsection 204-30(3) to deny the whole, or any part, of the imputation benefits you received in relation to the Special Dividend.

Section 207-145 will not apply to the whole, or any part, of the Special Dividend.

If you are a non-resident and you received the Special Dividend, and the Special Dividend is not attributable to a permanent establishment in Australia, no part of the Special Dividend will be included in your assessable income. Specifically: • The Special Dividend will constitute non-assessable non-exempt income (section 128D of the ITAA 1936). • You are not liable for dividend withholding tax on the Special Dividend (subparagraph 128B(3)(ga)(i) of the ITAA 1936). • You do not include the franking credit on the Special Dividend in your assessable income and you are not entitled to a tax offset for the franking credit on the Special Dividend (sections 207-20 and 207-70).

CGT event A1 happened when you disposed of your Symbio shares to ABB (section 104-10).

The time of CGT event A1 was the Implementation Date of 28 February 2024 (paragraph 104-10(3)(b)).

If you received the Default Consideration, the capital proceeds for disposing of each of your Symbio shares consisted of the sum of $1.91 of money and the market value of 0.192 of an ABB share (Scheme Consideration) (subsection 116-20(1)). The market value of ABB shares is worked out as at the time of CGT event A1.

If you received the Maximum Cash Consideration, the capital proceeds for disposing of each of your Symbio shares are $2.3174 of money and the market value of 0.0881 of an ABB share (Scheme Consideration) (paragraph 116-20(1)(a)). The market value of ABB shares is worked out as at the time of CGT event A1.

If you received the Maximum Scrip Consideration, the capital proceeds for disposing of each of your Symbio shares are the market value of 0.6792 of an ABB share (Scheme Consideration) (paragraph 116-20(1)(b)). The market value of ABB shares is worked out as at the time of CGT event A1.

The Commissioner accepts that the market value of one ABB share as at the time of CGT event A1 was $4.54.

The capital proceeds do not include the Special Dividend as it was not paid in respect of CGT event A1 happening to your Symbio shares.

You made a capital gain if the capital proceeds from disposing of each of your Symbio shares exceed its cost base at the time of CGT event A1 (subsection 104-10(4)). The capital gain is the amount of the excess.

You made a capital loss if the capital proceeds from disposing of each of your Symbio shares are less than its reduced cost base at the time of CGT event A1 (subsection 104-10(4)). The capital loss is the amount of the difference.

If you made a capital gain on disposing of your Symbio shares, you can treat the capital gain as a 'discount capital gain' provided that: • You are an individual, a complying superannuation entity or a trust (section 115-10). • The capital gain was worked out using a cost base that was calculated without reference to indexation at any time (subsection 115-20(1)) (which will be satisfied because Symbio shares could only have been acquired after Symbio was incorporated in 2006, making it impossible to satisfy section 114-1). • You held your Symbio shares for at least 12 months (excluding the day on which you acquired your Symbio shares and the Implementation Date) before the Implementation Date of 28 February 2024 (subsection 115-25(1)). • The other conditions of Subdivision 115-A are met.

You must disregard a capital gain or capital loss you made from CGT event A1 happening when you disposed of your Symbio shares to ABB (section 855-10) if: • you were a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the Implementation Date, and • your Symbio shares were not 'taxable Australian property' (as defined in section 855-15).

Your Symbio shares were taxable Australian property if they were either: • used by you at any time in carrying on a business through a permanent establishment in Australia (table item 3 of section 855-15), or • covered by subsection 104-165(3) about individuals choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident (table item 5 of section 855-15).

Subject to the qualifications in paragraphs 42 and 43 of this Ruling, if you make a capital gain from the disposal of your Symbio shares and you received either the Default Consideration, the Maximum Scrip Consideration or the Maximum Cash Consideration, you may choose to obtain scrip for scrip roll-over for the capital gain (sections 124-780, 124-785 and 124-790).

If any capital gain you might make from a replacement ABB share would be disregarded, otherwise than because of a roll-over, you cannot choose scrip for scrip roll-over (paragraph 124-795(2)(a)).

If you were a foreign resident just before the Implementation Date, you cannot choose scrip for scrip roll-over unless you received ABB shares and they were taxable Australian property (as defined in section 855-15) just after the Implementation Date (subsection 124-795(1)).

If you choose scrip for scrip roll-over and you received either the Default Consideration or the Maximum Cash Consideration, the part of the capital gain that is attributable to the receipt of ABB shares is disregarded (subsections 124-785(1) and 124-790(1)).

Any part of the capital gain that is attributable to the receipt of money is not disregarded because it is 'ineligible proceeds' for which roll-over is not available (subsection 124-790(1)).

If you choose scrip for scrip roll-over and you received the Maximum Scrip Consideration, your entire capital gain is disregarded (subsection 124-785(1)).

For the purposes of determining your eligibility to make a discount capital gain from a subsequent CGT event happening to the ABB shares you acquired if you received the Default Consideration, the Maximum Scrip Consideration or the Maximum Cash Consideration for which you choose scrip for scrip roll-over, the ABB shares you acquired in exchange for your Symbio shares are taken to have been acquired on the date you acquired, for CGT purposes, the corresponding Symbio shares (table item 2 of subsection 115-30(1)).

If you choose scrip for scrip roll-over and you received either the Default Consideration or the Maximum Cash Consideration, the first element of the cost base and reduced cost base of each replacement ABB share you received is worked out by reasonably attributing to it the cost base and reduced cost base (respectively) of the Symbio shares for which it was exchanged and for which the roll-over was obtained (subsections 124-785(2) and (4)).

You will have to reduce the cost base and reduced cost base of your Symbio shares by so much of it that is attributable to the money component of the capital proceeds you received (subsection 124-785(3)).

You can calculate the first element of the cost base and reduced cost base of each replacement ABB share by dividing the total cost bases of your Symbio shares (as reduced under subsection 124-785(3) for the money component) by the number of replacement ABB shares you received.

If you choose scrip for scrip roll-over and you received the Maximum Scrip Consideration, the first element of the cost base and reduced cost base of each replacement ABB share you received is worked out by reasonably attributing to it the cost base and reduced cost base (respectively) of the Symbio shares for which it was exchanged and for which the roll-over was obtained (subsections 124-785(2) and (4)).

The Commissioner accepts a reasonable method of attribution would be to calculate the first element of the cost base and reduced cost base of each replacement ABB share by dividing the total cost bases of your Symbio shares by the number of replacement ABB shares you received.

If you do not choose, or cannot choose, scrip for scrip roll-over, you must take into account any capital gain or capital loss from CGT event A1 happening on the disposal of your Symbio shares in working out your net capital gain or net capital loss for the income year in which CGT event A1 happened (sections 102-5 and 102-10).

If you make a capital gain where you do not choose, or cannot choose, scrip for scrip roll-over, you can treat the capital gain as a discount capital gain provided that the conditions of Subdivision 115-A are met (see paragraph 38 of this Ruling). In particular, you must have acquired your Symbio shares that were disposed of under the scheme of arrangement at least 12 months before the Implementation Date (excluding the date of acquisition and the Implementation Date).

If you do not choose, or cannot choose, scrip for scrip roll-over, and you received either the Default Consideration or the Maximum Cash Consideration, the first element of the cost base and reduced cost base of a replacement ABB share that you received is equal to the market value of the Symbio shares you gave in respect of acquiring the ABB share (subsections 110-25(2) and 110-55(2)), reduced by the proportion of the market value of the Symbio shares that is reasonably attributable to the money component of the capital proceeds you received (subsection 112-30(1)).

If you do not choose, or cannot choose, scrip for scrip roll-over, and you received the Maximum Scrip Consideration, the first element of the cost base and reduced cost base of a replacement ABB share that you received is equal to the market value of the Symbio shares you gave in respect of acquiring the ABB share (subsections 110-25(2) and 110-55(2))

The market value of the Symbio shares you gave is to be worked out as at the time when you acquired the ABB shares.

If you do not choose, or cannot choose, scrip for scrip roll-over, the acquisition date of the ABB shares is the date on which those shares were issued to you, being the Implementation Date of 28 February 2024 (table item 2 of section 109-10).

The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon.

Symbio is a company that was incorporated in Australia on 8 March 2006.

Symbio is the head company of an income tax consolidated group under Part 3-90.

Symbio was listed on the Australian Securities Exchange (ASX) on 18 May 2006. The ordinary shares in Symbio traded under the ASX code 'SYM'.

The business of Symbio consists of telecommunications services through cloud and software technology.

Symbio has one class of shares on issue. On the Implementation Date, there were 86,113,190 Symbio ordinary shares on issue.

Just before the Scheme Implementation Agreement was entered into, and just before the Implementation Date, Symbio had more than 300 shareholders.

For the purposes of section 855-30, the sum of the market values of the assets of Symbio that were taxable Australian real property (as defined in section 855-20) on the Implementation Date did not exceed the sum of the market values of the assets of Symbio that were not taxable Australian real property on the Implementation Date.

On 5 February 2024, the directors of Symbio determined the Special Dividend to be paid to shareholders who held Symbio shares on 19 February 2024 (Special Dividend Record Date).

The Special Dividend is a 'frankable distribution' as defined in section 202-40.

The Special Dividend consisted of a fully franked amount of 35 cents in respect of each Symbio share.

The Special Dividend was paid on 28 February 2024.

ABB is a company incorporated in Australia.

ABB was listed on the ASX on 15 October 2020. The ordinary shares in ABB trade under the ASX code 'ABB'.

ABB has more than 300 shareholders.

The majority of the shares in ABB are owned by Australian residents.

On 1 November 2023, Symbio and ABB announced that they had entered into a Scheme Implementation Agreement. Under the Agreement, Symbio agreed to propose that Symbio and the shareholders of Symbio enter into a scheme of arrangement under Part 5.1 of the Corporations Act 2001 pursuant to which ABB would acquire all of the ordinary shares in Symbio.

On 7 February 2024, a resolution in favour of the scheme of arrangement was passed by the shareholders of Symbio as required by subparagraph 411(4)(a)(ii) of the Corporations Act 2001.

The scheme of arrangement was approved by the Federal Court of Australia under paragraph 411(4)(b) of the Corporations Act 2001 on 16 February 2024.

ABB acquired all of the shares in Symbio on the Implementation Date (28 February 2024).

Under the scheme of arrangement, the shareholders of Symbio as at the Scheme Record Date (21 February 2024) received the Scheme Consideration for each share in Symbio on the Implementation Date.

There were 3 types of Scheme Consideration available, which could be chosen by each Symbio shareholder (with some exceptions): • Default Consideration of $2.26 (less the amount of the Special Dividend) and 0.192 of a share in ABB • Maximum Cash Consideration of $3.01264 (less the amount of the Special Dividend) • Maximum Scrip Consideration of 0.6792 of a share in ABB (calculated after the subtraction of the amount of the Special Dividend).

Symbio shareholders had to choose the type of Scheme Consideration they wanted to receive by 31 January 2024.

Symbio shareholders who did not make a valid choice received the Default Consideration.

Symbio shareholders whose address in the Symbio share register as at the Scheme Record Date was a place outside Australia or New Zealand, and Symbio shareholders with a small shareholding, automatically received the Maximum Cash Consideration.

As the number of Symbio shareholders who chose to receive the Maximum Cash Consideration exceeded certain limits, there was a scaleback of the Maximum Cash Consideration. This meant that Symbio shareholders who chose to receive the Maximum Cash Consideration received $2.3174 and 0.0881 of a share in ABB for each share in Symbio.

The shares in Symbio were suspended from trading on the ASX from the close of trading on 19 February 2024.

On 29 February 2024, Symbio was removed from the official list of the ASX.

The Special Dividend was paid at the discretion of the directors of Symbio. Neither ABB nor any of its associates had any influence or control over the payment of the Special Dividend.

Neither ABB nor any of its associates funded, or were in any way connected to the funding of, the Special Dividend.

The following facts are relevant for the purposes of section 207-159: • Symbio has never paid a dividend of more than 4.5 cents per ordinary share. • Symbio raised a large amount of share capital in 2019 but expended most of that money by 30 June 2021. • After the Special Dividend is paid by Symbio, ABB will not raise share capital in order to replenish the money expended by Symbio in paying the Special Dividend.

There was no 'significant stakeholder' or 'common stakeholder' in Symbio within the meaning of those terms in section 124-783.

Paragraph 124-780(3)(f) is satisfied in respect of the disposal of Symbio shares to ABB.

A Symbio shareholder, Symbio and ABB were not all members of the same 'linked group' (within the meaning of that term in section 170-260) just before the Scheme Implementation Agreement was entered into.

Symbio was not an exempting entity (section 208-20) or a former exempting entity (section 208-50) at the time when it paid the Special Dividend.

ABB did not make a choice under subsection 124-795(4) that Symbio shareholders could not obtain the roll-over in Subdivision 124-M for CGT event A1 happening in relation to the exchange of Symbio shares.

Subsections 124-810(3) and (5) did not apply to Symbio just before the Scheme Implementation Agreement was entered into.

The following table is a summary of the key dates for the Special Dividend and the scheme of arrangement. Table 1: Summary of key dates Date Event 1 November 2023 Scheme Implementation Agreement executed 22 December 2023 First court hearing 22 December 2023 Date of scheme booklet 7 February 2024 Scheme meeting 16 February 2024 Second court hearing to approve the scheme 19 February 2024 Effective date of the scheme 19 February 2024 Special Dividend Record Date 21 February 2024 Scheme Record Date 28 February 2024 Implementation Date and Special Dividend payment date