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A demerger occurs when a company separates part of its business into a new, independently listed company. Shareholders in the original company typically receive shares in the new entity at no cost.

Sharesight does not handle demergers automatically. Depending on whether the demerger includes a cost base allocation, the steps differ slightly.

Does the demerger include a cost base allocation?

When a company demerges, the original cost base of your shares may be split between the two companies according to an allocation ratio announced by the company. This is common in Australia, where the ATO typically issues a tax ruling specifying the ratio.

• If a cost base allocation applies — you need to reduce the cost base of your original holding and assign a portion to the new holding.
• If no cost base allocation applies — the new holding starts with a cost base of $0.

Check the company's demerger documentation or the ATO's class ruling for your specific demerger to confirm which applies.

Option 1: Demerger with cost base allocation

Use this approach when the company has published an allocation ratio (e.g. 70:30, meaning 70% of cost base stays with the original company and 30% goes to the new entity).

Step 1: Reduce the cost base of the original holding

1. Open your portfolio and navigate to the original (parent) holding.
2. Go to Trades & income > Add trade or adjustment.
3. Trade type: Adjust cost base
4. Demerger calculator: enter the allocation ratio (both ratios should add up to 100)
   • This holding: Ratio for original (parent) holding
   • The new holding: Ratio for new company
5. Cost Base Reduction: Should auto calculate based on the ratio you enter.
6. Click Add

Step 2: Add the new holding at the allocated cost base

1. From the Investments page, click Add investments > Individually add trade.
2. Search for the new company's ticker code and select it.
3. Trade type: Opening balance
4. Opening balance date: enter the date of demerger (same as above)
5. Total cost base: - this should equal the amount you deducted from the original holding in Step 1
6. Quantity: enter the quantity you received in the new company
7. Click Add.

Verify: The sum of the adjusted cost base on the original holding plus the new holding's opening balance cost base should equal your original total cost base.

Option 2: Demerger with no cost base allocation Use this approach when the company's announcement confirms no portion of the original cost base is allocated to the new entity.

1. From the Investments page, click Add investments > Individually add trade.
2. Search for the new company's ticker code and select it.
3. Trade type: Opening balance
4. Opening balance date: enter the date of demerger (same as above)
5. Set Total cost base to $0
6. Quantity: enter the quantity you received in the new company
7. Click Add.

Your original holding's cost base remains unchanged.

Example: Demerger with 70:30 cost base split

Company A demerges Company B. The ATO ruling confirms a 70:30 allocation — 70% of cost base stays with Company A, 30% goes to Company B.

• You hold 1,000 shares in Company A with a total cost base of $5,000
• You receive 500 shares in Company B at demerger

Adjust cost base on Company A: −$1,500 (30% × $5,000) Opening balance for Company B: 500 shares, total cost base $1,500

After the demerger:

• Company A cost base: $3,500
• Company B cost base: $1,500
• Combined: $5,000 ✓

Frequently asked questions

What date should I use? Use the scheme implementation date — this is the date shareholders received their shares in the new company, as stated in the demerger announcement.

What quantity do I enter for the new holding? Use the quantity from your holding statement, broker confirmation, or share registry. The ratio is usually stated in the demerger announcement (e.g. "one Company B share for every two Company A shares held").

Where do I find the allocation ratio? The ratio is typically included in the company's demerger booklet and confirmed in an ATO class ruling. Common sources: the company's investor relations page, ASX announcements, or the ATO website.

Disclaimer

The guide above is a suggestion on how to handle corporate actions in Sharesight and is not financial or tax advice. We advise you to consult your financial advisor or accountant. We also encourage you to review the official company announcements and any ATO rulings for full details.