Minister for Revenue and Assistant Treasurer Senator Helen Coonan said Parliament had today passed the Government's demerger legislation, giving businesses the certainty they need to move ahead with planned demergers.
In essence, a demerger involves restructuring a corporate or trust group by splitting it into two or more entities or groups, with the underlying owners holding one or more of those entities or groups directly.
"Business have reacted positively to the Government's demerger legislation and several large Australian companies have been keenly awaiting the passage of this Bill," Senator Coonan said.
"Tax relief for demergers will increase efficiency by allowing greater flexibility in restructuring businesses, providing an overall benefit to the economy.
"There will be many in the business breathing a sigh of relief tonight and preparing to move ahead with planned restructures."
Senator Coonan said the key features of the model to provide tax relief for demergers include:
- providing demerger tax relief where underlying ownership is maintained and the demerging entity divests at least 80 per cent of its ownership interests in the demerged entity;
- applying the measure to widely held and non-widely held companies and trusts;
- allowing capital gains tax relief at both the shareholder and entity levels; and
- providing an exemption from the existing dividend rules, subject to integrity rules.
"This model has been developed in consultation with industry representatives and tax practitioners," Senator Coonan said.
Providing tax relief for demergers was recommended by the Ralph report on business taxation reform.
The Bill passed by the Senate also includes consolidation and value shifting measures, which provide much needed certainty to business.