(subject to 100% rollover relief)
The ‘Merge this Holding’ function is designed to record a company merger in the situation where you hold shares in a listed company that is wholly acquired by another listed company. This function assumes 100% rollover relief, which commonly applies to mergers involving listed Australian companies.
To record a company merger, perform the following steps:
- Open the holding page for the company that has been acquired.
- Navigate to the Holding Settings panel in the sidebar and click the merge this holding button
- Enter the following three values:
- Date of merger
- New Holding
Click the “Save changes” button and Sharesight will do the rest.
When should I use the merge feature? This feature is designed to be used if you have a holding that has been merged into another holding and 100% rollover relief applies. For an example of how to handle a merger without rollover relief, see How to handle the Afterpay and Touchcorp merger..
Will the cancelled shareholding appear on the CGT report? No. A CGT event will only occur when you sell the shares in the new holding.
What happens to the cost base of the cancelled holding? The cost base of the cancelled holding will be transferred across to the new holding. Your preferred sale allocation method will be taken into account when calculating this value.
How does Sharesight track the performance of the cancelled holding? By default Sharesight captures the market value of the shares that are cancelled and uses that value to illustrate the performance of the cancelled holding up until the merge date.
Importantly, Sharesight also uses the same figure as the market value of the new holding. This ensures that no performance is ‘lost’ from your portfolio as a result of the merge event.
You also have the option of adjusting the default market value that will be captured as a result of the merger.
Where do I find the quantity for the new holding? Typically the companies subject to the merger will announce a ratio that will be used to calculate how many new shares to allocate to the new holding based on your current holding.
You should also receive notifications from the companies subject to the merger informing you of the quantity of new shares you will receive.
What happens if I already own shares in both companies? Additional shares acquired as a result of the merger will simply be added to your existing holding.
What happens when I save the merge event? Sharesight creates a merge (cancel) transaction against the cancelled holding. This transaction is similar to to a sell trade with the exception that no CGT event occurs.
Sharesight also creates a merge (buy) transaction that displays within the new holding and contains both the cost base and market value from the cancelled holding.
What happens when I sell the new shares acquired in the merger? An immediate CGT event will occur as with all sell trades.
If you sell the shares more than twelve months after the merge event you will be entitled to the standard CGT discount.
If you sell within twelve months of the merge event, Sharesight will not calculate a CGT discount. In some circumstances you may be entitled to a discount based on the original (pre-merger) purchase date. To claim this discount in this case, you should manually calculate the applicable discount and adjust your CGT result accordingly.
What should I do if rollover relief does not apply? If rollover relief is not available: 1. Record a sell trade against the holding in the company that has been acquired based on the current quantity and market value immediately prior to the merger. 2. Record a buy trade to reflect shares acquired in the new company such that the total value of the buy trade matches the total value of the sell trade recorded against the discontinuing company.
Important Disclaimer: We do not provide tax advice. Make sure you seek appropriate tax advice before implementing the ideas in this article.
Last modified on February 14, 2018 UTC