The Commissioner valued 228 million shares at the bare ASX price. The Court held the block was worth 18 per cent more.
In 2001 the Treasurer blocked Shell’s takeover bid for Woodside under the Foreign Acquisitions and Takeovers Act. Two decades later, the Commissioner used that very blockage to argue Shell’s 34.27 per cent stake should be valued at the bare ASX price.
The Federal Court has ruled it was worth 18 per cent more. Shell Energy Holdings Australia Limited v Commissioner of Taxation [2026] FCA 577 (Jackman J).
A deeming provision is a statutory fiction that reframes the asset being valued. Across 228 million Woodside shares deemed acquired in 1997, around $390 million of additional cost base.
The facts
Shell held a 34.27 per cent Woodside stake from the 1970s and 1980s. The continuity of majority underlying interests test under former s 160ZZSA of the 1936 Act failed as at 20 January 1997. By former s 160ZZSC(1), each Woodside share was deemed acquired on that date at market value.
Shell’s November 2000 takeover bid [14] was blocked by the Treasurer in April 2001 under s 18 of FATA [16]. The shareholding was sold in three tranches in 2010, 2014 and 2017. The Commissioner reviewed from May 2018, assessed at the VWAP of $9.41, and disallowed the objection in February 2024.
What is the asset being valued?
The Commissioner relied on Miley: market value of listed shares is generally the quoted price [56]. That is the starting point for a single share. It is not the answer here.
Placer Dome holds the statutory scheme determines the valuation principles [54]. Section 160ZZSC(1) creates a statutory fiction: a single hypothetical purchaser acquired each share, on the same day, in the 34.27 per cent block [61-64]. The fiction assumes no impediments. FATA, the 20 per cent takeover threshold, s 50 of the Trade Practices Act 1974 (Cth) - rejected [66-70].
The subject matter is the block. Per Spencer and Placer Dome, that is what gets valued [55]. For Shell that is 228 million shares as one parcel, conferring significant influence. Shell’s expert valued the premium at 15 to 20 per cent on 1,249 market transactions. The Commissioner’s expert proposed plus or minus 2.5 per cent. Jackman J called the negative end “commercially implausible” [88]. The court settled at 18 per cent: $11.12 per share [105].
Practitioner lessons
First, pre-CGT issues are not dead. Section 149-5 of the Transitional Provisions Act keeps former Pt IIIA alive for any asset on the books from 19 September 1985. The 1997 deemed cost base lives on, and is challengeable on audit of every later disposal year.
Second, the deeming clause defines the asset. Where a statute treats a holding as one parcel acquired by a single buyer on a single day, the block - not a single share - is what gets valued.
Third, the ASX price is the starting point, not the answer. For a block conferring significant influence, plan for a premium.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.