89.2% Of Cost Base Stays With BRE After Demerger

ATO Confirms Alurion Demerger Treatment

The tax question hanging over Brazilian Rare Earths Limited (ASX:BRE) shareholders after the Alurion Resources demerger has now been answered. The Australian Taxation Office has published Class Ruling CR 2026/66, confirming that the transaction qualifies as a demerger under Division 125 of the Income Tax Assessment Act 1997 for eligible investors.

For shareholders who held BRE shares on capital account, the ruling confirms that CGT event G1 occurred on the 24 July implementation date. A capital gain arises only where the $0.1829 per-share capital reduction exceeds the relevant BRE share cost base. The ruling also confirms that no capital loss can arise from that event.

Cost Base Split Between BRE and Alurion

Eligible shareholders can choose demerger roll-over relief, which disregards any capital gain from CGT event G1. Whether or not roll-over is chosen, the original cost base and reduced cost base immediately before the demerger must be apportioned between the two holdings: 89.2% remains attached to BRE shares and 10.8% transfers to the Alurion shares received.

The Alurion shares are also treated as having been acquired on the same date as the corresponding BRE shares for discount capital gains purposes. That matters for shareholders assessing future disposals, although the ruling applies only to investors within its defined eligibility class, including those who held BRE on the 22 July record date and held the shares on capital account.

Foreign Shareholders Receive Withholding Tax Clarity

The ATO has separately confirmed that the value of the Alurion shares distributed is not assessable income under section 44(1). It is treated as a non-assessable, non-exempt demerger dividend, with no dividend withholding tax for eligible foreign-resident shareholders. Non-residents whose BRE shares are taxable Australian property face additional conditions if they want to use demerger roll-over relief.

Ruling Follows Separate Alurion Listing

The demerger separated the Amargosa Bauxite-Gallium Project into Alurion, which has its own board and management team, while BRE retained its focus on rare earth and critical minerals in Bahia, Brazil. Eligible BRE shareholders received about 0.5607 Alurion shares for each BRE share held, and Alurion began trading on the ASX on 31 July. BRE retained 39,025,413 Alurion shares.

The ruling removes an administrative uncertainty, but it is not a universal tax outcome. It excludes, among others, shareholders who held BRE shares as trading stock or revenue assets, certain temporary residents and investors subject to the Division 230 taxation rules. The remaining practical question is how each affected shareholder records the 89.2% and 10.8% allocations, and whether choosing roll-over relief produces the appropriate result for their individual circumstances.