The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello


11 March 1996 - 3 December 2007

Media Release of 17/10/2007


Demutualisation of Health Insurers

The Treasurer announced today that the Government intends to amend the income tax laws to provide capital gains tax (CGT) certainty for policyholders of health insurers who receive shares as part of their health insurer’s demutualisation.

These changes will ensure that policyholders, including policyholders holding a beneficial membership interest via a trust, who give up any rights they may have in their health insurer in exchange for shares will not be subject to a CGT taxing point at the time of the exchange and will provide consistency between the income tax laws and the requirements of the Private Health Insurance Act 2007.

In addition, the Government will make changes to provide relief from CGT for transactions that relate to the mechanism that allows policyholders to receive shares.  

The Government will also provide a legislative framework for issued shares to be held on trust for ‘lost’ policyholders, who, for example, are unable to receive shares because they reside overseas or have not agreed to receive their shares.  Broadly, the Government intends to facilitate the issue of shares to the trustee, the transfer of shares from the trustee to policyholders and the cancellation of any remaining shares in the trust after a certain period of time without adverse or advantageous CGT consequences to either the trustee or the policyholder.  It is the Government’s intention that the trustee will otherwise be subject to the existing income tax rules.

The Government proposes that post‑CGT policyholders receive a cost base for their shares that is based on their share of their health insurer’s net tangible assets and that pre‑CGT policyholders receive a market value cost base.  The Government also intends to provide a similar ‘net tangible assets’ based cost base for any rights that post‑CGT policyholders surrender for a cash payment, rather than shares, as part of their health insurer’s demutualisation.

These changes will apply from 1 July 2007.

17 October 2007

Contact:  Renae Stoikos - 03 9650 0244