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11.1.4. Exchange of Shares


For a share-for-share (or scrip-for-scrip) transaction to be entitled to the relief, all of the following conditions must be satisfied:

  • a shareholding entity must exchange a share or option in a company for a share or option in another company;
  • the exchange must be in consequence of a single arrangement that has the result of providing the acquiring entity with a holding of at least 80% of the shares in the target company. Furthermore, all owners of voting shares in the target company must participate in the exchange, with the participating being made available “on substantially the same terms for the owners of interests of a particular type in” the target company;
  • the original interest must have been acquired by the original holder on or after 20 September 1985;
  • in the absence of the rollover, a capital gain would arise in respect of the shares held by the shareholder in the target company;
  • the shareholders must elect through the appropriate notifications to claim the CGT rollover; and
  • the arrangement must not be one that is excluded from the rollover relief.

Depending on certain situations (e.g. whether the target and acquiring companies are not dealing at arm’s length), additional conditions may apply.

Direct Tax Consequences

If the above conditions are satisfied, any capital gains or losses arising from the exchange are disregarded and the shareholder’s cost base for the newly acquired shares is taken to be the cost base of the shares in the original target company.

Indirect Tax Consequences

Share-for-share exchanges may be subject to the following indirect taxes:

  • stamp duty in certain states (i.e. New South Wales and South Australia) on unlisted shares in landholding companies; and
  • goods and services tax (GST), with a corresponding claim for input taxes paid, in certain cases. These include cases where other entities are engaged to perform various services (e.g. the acquisition of tax and legal services required for the merger) in connection with the exchange of shares.