Demutualisation of Non-resident Mutual Companies

The Assistant Treasurer, Senator Rod Kemp, today announced that the Government will introduce legislative amendments that will protect the Australian members of non-resident mutual companies that have an Australian subsidiary from adverse taxation consequences on demutualisation.

The Government has already legislated to ensure that members of Australian mutual organisations entitled to receive shares when the organisation demutualises do not face possible problems such as double taxation of capital gains.

Further legislative action is necessary to ensure that similar problems do not affect Australian members of non-resident mutual companies that have an Australian subsidiary on demutualisation.

The Government’s amendments will ensure that no capital gains tax (CGT) taxing event arises as a result of Australian members giving up their membership rights when a non-resident mutual company that has an Australian subsidiary demutualises. Any shares acquired will be post-CGT assets with no actual or deemed cost base.

The amendments will apply to protect the large Australian membership of Tower Corporation, a New Zealand based mutual insurer, from adverse taxation consequences when Tower demutualises.

The Government will prepare the legislative amendments for introduction to Parliament as soon as possible, with the amendments to have effect from the date of this announcement.

MELBOURNE

23 September 1999