How the Scrip-for-Scrip Rollover Works
How it works
When a company is acquired through a takeover, merger, or scheme of arrangement and you receive replacement shares in the acquiring company instead of (or in addition to) cash, Subdivision 124-M of the ITAA 1997 allows you to defer the capital gain. Instead of triggering an immediate CGT event on the disposal of your original shares, the cost base of your original shares rolls over to the replacement shares. You only pay CGT when you eventually sell the replacement shares.
For rollover to be available, the acquiring company must obtain at least 80% of the voting shares in the target company as part of the takeover. The acquirer must also not have vetoed rollover — under section 124-780(3)(c), the acquiring entity can issue a written statement denying rollover to shareholders. If the offer includes a mix of cash and shares, only the share component can be rolled over. The cash component triggers an immediate capital gain, with a proportionate share of the original cost base allocated to it.
This calculator handles the per-parcel cost base allocation for both full scrip and mixed cash-and-scrip offers. It calculates the proportionate split of your cost base between the cash and share components based on section 124-790, and shows you the rolled-over cost base of your replacement shares. If you held multiple parcels of the original shares (bought at different times and prices), each parcel is processed separately to preserve its individual cost base and acquisition date for future discount eligibility.
When to use this calculator
- You received a takeover or scheme of arrangement offer for shares you hold, and the offer includes replacement shares in the acquiring company
- The offer is a mixed cash-and-scrip deal and you need to calculate the CGT on the cash component and the rolled-over cost base of the new shares
- You want to check whether the 80% ownership threshold has been met by the acquirer
- You hold pre-CGT shares (acquired before 20 September 1985) and need to understand how rollover affects their status
- You are a significant stakeholder (30%+ holding) and need to understand the joint election requirement
Key concepts
- Scrip-for-scrip rollover
- A CGT deferral mechanism under Subdivision 124-M where the cost base of original shares rolls over to replacement shares received in a takeover. No CGT is payable on the share exchange — the gain is deferred until the replacement shares are eventually sold.
- 80% acquisition threshold
- Under section 124-780(2), the acquiring company must obtain at least 80% of the voting shares in the target company for scrip-for-scrip rollover to be available. This is measured at the overall takeover level — individual shareholders do not need to hold 80% themselves.
- Proportionate cost base split
- For mixed cash-and-scrip offers, section 124-790 requires the original cost base to be split proportionally. The cash fraction equals cash received ÷ total consideration (cash + market value of replacement shares). The remaining cost base rolls over to the new shares.
- Pre-CGT share treatment
- Shares acquired before 20 September 1985 lose their pre-CGT status when scrip-for-scrip rollover is elected. Under section 124-795, the replacement shares receive the market value at the implementation date as their cost base, and the acquisition date is reset to the implementation date.
Worked example — mixed cash-and-scrip takeover offer
Sophie holds 1,000 shares in Target Ltd, purchased in March 2020 for $12.50 per share (cost base: $12,500, plus $19.95 brokerage = $12,520 total cost base). Acquirer Ltd launches a takeover offering $6.00 cash plus 0.8 Acquirer Ltd shares per Target Ltd share. The acquirer obtains 92% of Target Ltd shares (above the 80% threshold) and has not vetoed rollover. Acquirer Ltd shares are trading at $10.00 at the implementation date.
Total consideration per Target share: $6.00 cash + (0.8 × $10.00) = $14.00
| Step | Detail | Amount |
|---|---|---|
| Cash received | 1,000 × $6.00 | $6,000 |
| Replacement shares received | 1,000 × 0.8 | 800 shares |
| Market value of replacement shares | 800 × $10.00 | $8,000 |
| Total consideration | $6,000 + $8,000 | $14,000 |
| Cash component (CGT event A1) | ||
| Cash proportion | $6,000 ÷ $14,000 | 42.86% |
| Cost base allocated to cash | $12,520 × 42.86% | $5,366 |
| Capital gain on cash | $6,000 − $5,366 | $634 |
| 50% CGT discount | Held > 12 months | −$317 |
| Assessable gain (cash portion) | $317 | |
| Share component (rolled over) | ||
| Cost base rolled over | $12,520 − $5,366 | $7,154 |
| Cost base per replacement share | $7,154 ÷ 800 | $8.94 |
| Deemed acquisition date | Inherits original: March 2020 |
Sophie pays CGT on $317 this year (the cash portion). Her 800 Acquirer Ltd shares have a cost base of $8.94 each and retain the original March 2020 acquisition date, so they are already eligible for the CGT discount whenever she sells them.