The parties can cancel the proposed transaction if, among other...

The parties can cancel the proposed transaction if, among other things, the ATO does not grant specific demerger relief under tax laws (p2 of the release).I don't know but believe that this relates to the treatment of the 86c as a dividend or capital return or portions of both.

Dividends obviously are treated as income for tax purposes while capital is treated as a gain or loss which may be subject to a 50% discount for shares held longer than a year. Normally a company will issue a statement indicating the ruling of the ATO. I think the expectation here would be that the 86c will be treated as capital, meaning that an individual would subtract his cost base and then apply any applicable 50% reduction to the difference and pay tax on that at the taxpayer's marginal rate. That's in the non-super environment. For holdings inside super, generally no tax is payable.

There is implicit in this thinking that the 86c is all there is and that there will be no final dividend paid by AMA for FY17-18. If the construction is such that we have say a 2c dividend in the equation, then the 2c plus franking are treated as income and it would mean that effectively only 84c was treated as capital, but it will depend on how they structure it and what the ATO decides. My assumption is that they have no intention of paying a final dividend.

The shares in the new ACAD company will have an ascribed initial value, yet to be determined. That will be the cost base going forward for investors in that company.