Today I am announcing the Governments tax treatment of the wool stockpile that will apply to the new company, WoolStock Australia. The Minister for Agriculture, Fisheries and Forestry and the Minister for Finance and Administration are confirming the privatisation of the wool stockpile in a separate press release today.
The Government considers it appropriate to exempt WoolStock Australia from income tax on its stockpile disposal activities. This tax treatment reflects the particular circumstances of the wool stockpile privatisation and differs from the existing "rule the books" approach which ordinarily applies to the trading stock of a transition entity under Subdivision 57-L of the Income Tax Assessment Act 1936. (A transition entity is an exempt entity that becomes taxable.)
Distinctive features of the wool stockpile privatisation are:
- it involves the disposal of a frozen stockpile of trading stock (rather than the ordinary stock turnover of an ongoing business concern); and
- it involves no change in the ultimate ownership of the stockpile wool growers with units in the stockpile pre-privatisation are also the owners post-privatisation. WoolStock Australia will sell the stockpile and distribute the returns to wool growers.
This treatment is consistent with the Governments policy objective of placing control of commercial decisions about the sale of the wool stockpile in the hands of the unitholders in a way that protects their existing rights. It ensures that net returns from the disposal of the wool stockpile will continue to be taxed only once to these unitholders at their marginal tax rate.
The Government will make this tax treatment available to other transition entities that are in similar circumstances to the wool stockpile privatisation.