Non-Assessable Stock in Australia: 2026 Investor Guide

Non-assessable stock most commonly arises in two scenarios:

Bonus Share Issues

A company may issue new shares to existing shareholders instead of paying a cash dividend. This is known as a bonus share issue. If these bonus shares are issued from the company’s share capital (rather than from retained earnings or profits), they are generally considered non-assessable. This means you do not pay tax on the value of the shares when you receive them. However, if the bonus shares are funded from company profits, they may be treated as a dividend and taxed accordingly.

Demergers

A demerger occurs when a company splits off part of its business—such as a subsidiary or division—and allocates new shares in the spun-off entity to existing shareholders. Under certain conditions, these new shares can be treated as non-assessable, meaning you do not pay tax on their receipt at the time of the demerger. The ATO provides specific criteria for when demerger relief applies, and it is important to check whether a particular event qualifies.

While receiving non-assessable stock does not trigger immediate income tax, it is not a permanent tax exemption. Instead, the tax is deferred until you eventually sell the shares. At that point, you may be liable for CGT on any capital gain. The cost base of your shares—the amount used to calculate your gain or loss—will need to be adjusted to reflect the receipt of non-assessable stock.

Adjusting Your Cost Base

When you receive non-assessable stock, you must adjust the cost base of your original shares and the new shares according to ATO guidelines. This ensures that when you sell either set of shares in the future, you pay CGT only on the actual gain made since your original investment. The ATO provides formulas for splitting the cost base between your original and new shares, especially in the case of demergers.

Importance of Record-Keeping

Accurate record-keeping is essential. You should keep detailed records of:

• The date and number of shares received
• The original purchase price of your shares
• Any adjustments to the cost base as a result of bonus issues or demergers

This information will be needed when you eventually sell your shares and calculate your CGT liability.

Bonus Shares from Share Capital

If a company issues bonus shares from its share capital, these are generally non-assessable. For example, if you hold shares in a company that decides to reward shareholders with additional shares instead of a cash dividend, and those shares are issued from share capital, you do not pay tax on receipt. However, you will need to adjust your cost base for CGT purposes.

Demergers and Corporate Restructures

Demerger activity has become more common in recent years, and 2026 is no exception. When a company undertakes a demerger and you receive shares in a new entity, those shares may be non-assessable if the demerger meets ATO requirements. The main criteria include maintaining proportionate ownership and meeting certain ownership thresholds. If the demerger qualifies, you do not pay tax on receipt, but you must split your original cost base between the old and new shares.

Example: Demerger Event

Suppose you own shares in a large Australian company that announces a demerger of one of its divisions. You receive new shares in the spun-off company as part of the transaction. If the demerger qualifies for ATO relief, the new shares are non-assessable. You do not pay tax when you receive them, but you must adjust your cost base for both sets of shares. This adjustment is crucial for accurate CGT calculations when you eventually sell either set of shares.

Non-assessable stock can be a useful tool for deferring tax, but it is not a way to avoid tax altogether. Here are some key points to consider:

Tax Deferral

Receiving non-assessable stock allows you to defer tax until you sell the shares. This can provide flexibility in managing your tax position, as you can choose when to realise the gain.

Potential for CGT Discount

If you hold your shares for more than 12 months before selling, you may be eligible for the CGT discount, which can reduce the amount of tax you pay on any capital gain.

Importance of Timing

Because tax is only triggered when you sell the shares, you have some control over the timing of your tax liability. This can be helpful if you expect your income to be lower in a future year, or if you want to manage your overall tax position.

Company Considerations

For companies, issuing non-assessable stock can be a way to reward shareholders or facilitate restructures without creating immediate tax consequences for investors. This approach has become more relevant as companies adapt to changing market conditions and look for ways to retain cash or restructure their operations.

The ATO regularly updates its guidance on how non-assessable stock is treated, especially as corporate activity evolves. It is important for investors to review ATO updates each year, as eligibility criteria and reporting requirements can change. If you are unsure about how a particular event affects your tax position, consider seeking professional advice.

• Non-assessable stock can provide a tax deferral benefit, but you must keep accurate records for future CGT calculations.
• Not all bonus shares or demerger distributions are non-assessable—check the source of the shares and whether the event qualifies under ATO rules.
• Adjust your cost base as required to ensure you pay the correct amount of CGT when you eventually sell your shares.
• Stay informed about ATO guidance and consider professional advice if you are unsure about your obligations.

Understanding non-assessable stock and how it applies to your investments can help you manage your tax position more effectively in 2026 and beyond. By keeping good records and staying informed, you can make the most of these opportunities while meeting your tax obligations.