360 Capital : Class Ruling 2017/75 Special Dividend rebalancing of capital structure - 14 November 2017

Contents Para‌‌‌‌‌‌‌‌‌‌‌‌

Explanation 37

Detailed contents list 103

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Income tax: Special Dividend, rebalancing of stapled security structure: 360 Capital Group Limited

This publication provides you with the following level of protection:‌

This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953.

A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes.‌

If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you.‌

1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates.‌‌‌‌

   Relevant provision(s)

2. The relevant provisions dealt with in this Ruling are:

   • subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)

   • subparagraph 44(1)(a)(i) of the ITAA 1936‌

   • subparagraph 44(1)(b)(i) of the ITAA 1936

   • subparagraph 44(1)(c)(i) of the ITAA 1936

   • section 128B of the ITAA 1936

   • subparagraph 128B(3)(ga)(i) of the ITAA 1936

   • subsection 128B(3E) of the ITAA 1936

   • section 128D of the ITAA 1936

   • former section 160APHM of the ITAA 1936

   • former section 160APHN of the ITAA 1936

   • Section 177EA of the ITAA 1936

   • Division 67 of the Income Tax Assessment Act 1997

     (ITAA 1997)

   • section 67-25 of the ITAA 1997

   • subsection 110-25(5) of the ITAA 1997

   • subsection 110-55(2) of the ITAA 1997

   • section 204-30 of the ITAA 1997

   • Division 207 of the ITAA 1997

   • section 207-20 of the ITAA 1997

   • subsection 207-35(1) of the ITAA 1997

   • subsection 207-75(2) of the ITAA 1997

   • section 207-145 of the ITAA 1997

   • paragraph 207-145(1)(a) of the ITAA 1997.

     All subsequent legislative references in this Ruling are to provisions of the ITAA 1997 unless specified otherwise.

     Class of entities

3. The class of entities to which this Ruling applies are the holders of 360 Capital Group stapled securities ('Securityholders') who:

   • participated in the Scheme that is the subject of this Ruling

   • received the Special Dividend

   • held their stapled securities on capital account, that is, the shares were neither held as revenue assets (as defined in section 977-50) nor as trading stock (as defined in subsection 995-1(1)), and

   • are not subject to the taxation of financial arrangement rules in Division 230 in relation to gains and losses on their stapled securities.

     (Note: Division 230 will generally not apply to individuals, unless they have made an election for that Division to apply to them.)

     Qualifications

4. The Commissioner makes this Ruling on the precise scheme identified in this Ruling.

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5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 22 of this Ruling.

6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then:

   • this Ruling has no binding effect on the Commissioner because the scheme entered into is not the scheme on which the Commissioner has ruled, and

   • this Ruling may be withdrawn or modified.

     Date of effect

7. This Ruling applies from 1 July 2017 to 30 June 2018. The Ruling continues to apply after 30 June 2018 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).

   Scheme

8. The following description of the scheme is based on information provided by the applicant. The following documents, or relevant parts of them form part of and are to be read with the description:

   • Class ruling application dated 21 July 2017 on behalf of 360 Capital Group Limited and 360 Capital FM Limited as responsible entity of 360 Capital Investment Trust

   • Constitution of 360 Capital Group Limited (as amended)

   • Supplemental Deed made on 31 October 2017 by 360 Capital FM Limited as responsible entity of 360 Capital Investment Trust to amend the Constitution of 360 Capital Investment Trust

   • 360 Capital Group Annual Report for the years ended 30 June 2016 and 30 June 2017, and

   • Financials for the half-year ended 31 December 2016.

     Note: certain information has been provided on a

     commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation.

9. 360 Capital Group is a real estate investment and funds management group that concentrates on the strategic investment and investment management of real estate and real estate-related assets.

10. 360 Capital Group Limited ('360CGL') and its subsidiaries carry out the investment management and property management activities for the 360 Capital Group. 360 Capital FM Limited as responsible entity of the 360 Capital Investment Trust ('360CIT') and its sub-trusts hold investments in property funds including co- investment stakes in property funds managed by 360CGL and its subsidiaries.

11. 360CGL is an Australian-resident public company. 360CIT is an Australian resident trust. The shares in 360CGL are stapled to the units in 360CIT. The Securityholders hold these stapled securities ('360 Capital Securities') which are listed on the Australian Securities Exchange (ASX). The Securityholders are a mix of individuals, companies, superannuation funds and other institutional investors, some of which are non-residents.

12. 360CGL's share capital structure consists of ordinary class shares. As at 30 October 2017, 360CGL had 227,102,516 fully paid ordinary class shares on issue.

13. On 9 January 2017, the 360 Capital Group settled a divestment transaction to sell the majority of its funds management platform and co-investment stakes in its listed and unlisted funds for approximately $290.7 million. As a consequence, 360CGL:

    • received proceeds of approximately $103.8 million on settlement, and

    • realised a profit of approximately $77.6 million. This profit was included in the 31 December 2016 accounts of 360CGL.

14. The above proceeds caused a significant increase in 360CGL's net tangible assets (NTA) and the relative NTA split between 360CGL and 360CIT.

15. Consistent with its current strategy, most of the activity which will be undertaken by the 360CGL Group in the future will be passive co-investments held by 360CIT, including equity investments in

    ASX-listed real estate investment trusts (REITS) and mezzanine debt investments in Australian real estate assets.

16. In order to meet this strategy going forward, 360 Capital Group's capital structure requires a re-balancing in order for 360CIT to be provided with the necessary capital base to carry out its business of making debt and equity investments in property funds.

17. To effect this capital re-balancing, 360CGL resolved to pay a Special Dividend to Securityholders who were then mandatorily required to contribute those dividend proceeds as capital to 360CIT.