MGS Private · Corporate Consolidation & Restructure

Insertion of Holding Companies
into Groups

Inserting a new holding company above an existing operating company or group is a common restructuring objective — but it raises specific CGT, duty and corporate law questions that must be addressed before the insertion is completed.

Holding Company Insertion

Why insert a holding company
and how to do it without CGT

There are several commercial reasons to insert a new holding company above an existing operating company — asset protection (separating retained profits from trading risk), consolidating group ownership, facilitating the entry of new equity investors, and establishing a structure for tax consolidation.

The insertion is typically achieved by shareholders exchanging their shares in the operating company (OpCo) for shares in the new holding company (HoldCo) — which then acquires shares in OpCo. From the shareholder’s perspective, the economic position is unchanged; they hold HoldCo shares rather than OpCo shares.

CGT consequences — share exchange may trigger CGT Event A1 unless the Subdivision 124-M rollover is available
Subdivision 124-M share exchange rollover — the primary CGT relief for holding company insertions
All shareholders must exchange their shares in OpCo — unanimous participation required for the rollover
Only HoldCo shares may be received as consideration — no cash component permitted
Stamp duty — the acquisition of OpCo shares by HoldCo may attract landholder duty if OpCo is property-rich
Corporate reconstruction duty relief where the insertion is within a qualifying related-company group
ASIC considerations — share exchange, constitution amendments and required lodgments

Subdivision 124-M — Share Exchange Rollover

The CGT rollover for holding company insertions

What It Does

Subdivision 124-M provides CGT rollover relief where shareholders exchange all their shares in OpCo for shares in a new HoldCo — which ends up owning all shares in OpCo. The gain on the exchange of OpCo shares is rolled over into the HoldCo shares, deferring the tax consequence.

Key Conditions

HoldCo must acquire all shares in OpCo from all shareholders — unanimous participation is required. The shareholder must receive only HoldCo shares (no cash component). Both companies must be Australian residents. All conditions must be met at the time of the exchange.

Cost Base Preservation

The rollover preserves the shareholder’s cost base in the OpCo shares — which becomes the cost base of the HoldCo shares. The gain is deferred until the HoldCo shares are eventually disposed of.

HoldCo’s Cost Base in OpCo

HoldCo acquires OpCo shares at their market value — setting HoldCo’s cost base in OpCo for CGT purposes. If the group later forms a consolidated group, this market value cost base flows through the tax cost setting rules on entry.

Stamp Duty on the Insertion

The acquisition of OpCo shares by HoldCo may attract landholder duty if OpCo is a landholder in NSW or another State. Corporate reconstruction duty relief may be available if the insertion is within a qualifying related-company group — assessed separately from the CGT rollover.

Inserting a holding company into your group?

Get the CGT and duty analysis done before the transaction proceeds. Brief MGS Private through your accountant or lawyer.

(02) 9231 5111 contact@macquariegs.com.au

Insertion of Holding Companiesinto Groups

Why insert a holding companyand how to do it without CGT

Subdivision 124-M — Share Exchange Rollover

Inserting a holding company into your group?

Insertion of Holding Companies
into Groups

Why insert a holding company
and how to do it without CGT