Australia rules on scrip-for-scrip relief for African Gold shareholders

The transaction was implemented on 29 April 2026. African Gold was the Australian head of a tax-consolidated group with African mining subsidiaries; Montage is incorporated in Canada. Scheme shareholders generally received 0.0628 Montage common share for each African Gold ordinary share. The October ruling applies to the specified class for 1 July 2025 to 30 June 2026; those historical transaction and income-year dates are not its issue date.^[1]

The disposal triggered CGT event A1 under Income Tax Assessment Act 1997 section 104-10. The ruling measures capital proceeds by the market value of the Montage shares at the event. Shareholders making a capital gain may choose Subdivision 124-M scrip-for-scrip rollover, subject to sections 124-780, 124-785 and 124-795 and the ruling’s qualifications. The gain is then disregarded rather than converted into a general tax exemption.^[1][3]

For this scheme, Subdivision 124-M makes relief conditional on the eligible share exchange, acquisition and participation tests, and the shareholder’s choice. Section 124-785 carries the original cost base into replacement shares by reasonable attribution; section 124-790 restricts relief for non-share consideration. Section 124-795 limits a foreign resident’s rollover to replacement interests that are taxable Australian property. These are the rules relevant to the completed April exchange, not a general conclusion about later transactions.^[1][2]

Where rollover is chosen, the first elements of the replacement shares’ cost base and reduced cost base are calculated by reasonably attributing the respective original bases of the exchanged African Gold shares. The ruling accepts dividing the total respective bases by the number of replacement shares where the original shares had identical rights and obligations and were acquired on the same date. Without rollover, the first elements instead equal the market value of the African Gold shares given up, determined when the Montage shares were acquired.^[1][2][3]

Foreign-resident shareholders require separate analysis. Paragraphs 12–13 apply the section 855-10 disregard where the original shares were not taxable Australian property. A foreign shareholder with a gain that is not disregarded can choose rollover only if the replacement Montage shares are taxable Australian property immediately after implementation. The ruling is therefore not blanket rollover approval for every non-resident investor.^[1][4]

Eligibility excludes specified shareholders, revenue-account and trading-stock holdings, employee-share-scheme acquisitions and persons subject to Division 230 for the scheme. Montage and its shareholder subsidiaries are excluded from Scheme Shareholders; some ineligible foreign holders instead received sale-agent proceeds. For MNE tax teams, the useful lesson is to distinguish the shareholder, consideration and asset conditions in this specific cross-border ruling rather than transfer its result automatically to another acquisition.^[1]