ATO Confirms Tax Relief for De Grey Shareholders in Northern Star Deal

Background to the Acquisition

On 5 May 2025, Northern Star Resources Ltd (NST) completed its acquisition of De Grey Mining Ltd (De Grey) through a Scheme of Arrangement, exchanging each De Grey share for 0.119 NST shares. This transaction consolidated De Grey’s gold exploration and development assets under Northern Star’s expanding portfolio, marking a significant reshaping of the Australian gold mining landscape.

The Australian Taxation Office (ATO) has now issued Class Ruling CR 2025/40, providing legally binding guidance on the income tax consequences for De Grey shareholders who participated in the scheme. This ruling is pivotal for investors seeking clarity on their capital gains tax (CGT) obligations following the share exchange.

Key Tax Implications for Shareholders

The ruling confirms that shareholders who held their De Grey shares on capital account and were registered as of the record date (28 April 2025) can rely on the scrip-for-scrip rollover provisions. This means that if shareholders made a capital gain on disposing of their De Grey shares, they may elect to defer CGT by attributing the cost base of their original shares to the new NST shares received.

For those who opt for the rollover, the capital gain is disregarded at the time of the exchange, effectively postponing tax until the disposal of the NST shares. The acquisition date for discount capital gains purposes is also preserved, which can be beneficial for long-term investors.

Conversely, shareholders who do not or cannot elect the rollover must recognize any capital gain or loss immediately, with the market value of NST shares at $19.2291 per share (or $2.29 per De Grey share exchanged) serving as the disposal proceeds. This valuation is critical for accurate CGT calculations.

Scope and Limitations of the Ruling

The Class Ruling explicitly excludes shareholders who held De Grey shares on revenue account, those subject to the investment manager regime, or under the taxation of financial arrangements rules. Foreign resident shareholders are generally exempt from CGT on this disposal unless their shares qualify as taxable Australian property.

Shareholders are advised to consult independent tax professionals to understand how the ruling applies to their individual circumstances, especially given the complex interplay of Australian tax laws and the specific conditions of the scheme.

Broader Implications

This ruling not only provides certainty to thousands of De Grey shareholders but also sets a precedent for future large-scale consolidations in the mining sector. By clarifying the tax treatment, the ATO helps mitigate investor uncertainty, potentially smoothing the path for similar transactions.

For Northern Star, the acquisition and subsequent tax clarity reinforce its strategic growth ambitions in gold mining, while for the market, it underscores the importance of understanding tax consequences in corporate restructures.