ATO Confirms Tax Relief for DUI Shareholders After AUI Merger

ATO Clarifies Tax Treatment of DUI-AUI Merger

The Australian Taxation Office (ATO) has delivered clarity on the tax implications of the recent merger between Diversified United Investment Limited (DUI) and Australian United Investment Company Limited (AUI), issuing Class Ruling CR 2026/22. This ruling confirms that eligible DUI shareholders who exchanged their DUI shares for AUI shares on 30 April 2026 can access scrip for scrip capital gains tax (CGT) roll-over relief, effectively deferring CGT liabilities arising from the disposal.

This development follows AUI's strategic acquisition of all remaining DUI shares under a scheme of arrangement approved by the Federal Court in April 2026. Shareholders received approximately 0.4724 AUI shares for each DUI share surrendered, a ratio reflecting the relative market values at the time. The merger, which was first announced in January 2026, aims to enhance scale and reduce costs for AUI, as detailed in the company's earlier merger to boost scale announcement.

Eligibility and Conditions for Tax Relief

The Class Ruling sets out clear eligibility criteria: shareholders must have held their DUI shares on capital account (not as trading stock or revenue assets), were registered on the DUI share register as of 23 April 2026, and are not subject to specific tax regimes such as the investment manager regime or Division 230's taxation of financial arrangements. Notably, foreign residents generally cannot claim the roll-over unless the replacement AUI shares qualify as taxable Australian property.

If shareholders opt for the scrip for scrip roll-over, any capital gain from disposing of DUI shares is disregarded for tax purposes at this stage. Instead, the cost base of the new AUI shares is adjusted to reflect the original DUI shares' cost base, preserving the capital gains tax position for future disposals. Conversely, shareholders who do not or cannot elect the roll-over must recognise any capital gain or loss immediately, with the acquisition date of the AUI shares set at the merger's implementation date.

Implications for Shareholders and Market Impact

The ruling provides much-needed certainty for DUI shareholders navigating the tax consequences of the merger. It aligns with AUI's broader growth trajectory, which saw a 7% profit rise earlier this year despite headwinds, as reported in February 2026. The merger is expected to consolidate AUI's position in the investment management sector, expanding its equity base by over $1 billion and promising ongoing dividend continuity.

Shareholders who fall outside the eligibility parameters, including certain foreign investors and those holding shares through employee schemes, face different tax treatments and should consult professional advisers. The ATO's comprehensive ruling underscores the complexity of merger-related tax matters and the importance of tailored advice.