The Assistant Treasurer, Senator Rod Kemp today announced amendments to the transitional taxation measures contained in Company Laws Amendment (Company Law Review) Act 1998 (the Act) concerning the merger of share premiums with share capital.
The Act introduced tainting rules to prevent companies transferring profits and other amounts to their share capital accounts and distributing those profits as preferentially taxed share capital. The tainting rules apply where any amount other than share capital is transferred into the share capital account. (Where a company’s share capital is tainted it converts into a profit account and distributions from it are treated as dividends.)
However, as an exception to the foregoing rule, the Act provided for transitional rules that allowed companies to merge their share premium accounts with their share capital account without tainting their share capital account, provided the merger was done in accordance with Schedule 5 of the Company Law Review Act 1998.
It has come to the attention of the Government that there are certain companies to which the transitional rules do not extend for technical reasons. To address this anomaly the Government intends to amend the transitional rules so that they apply to all resident companies, not only those falling within the scope of Schedule 5 of the Company Law Review Act 1998. For this purpose ‘resident companies’ would be those that are both resident for taxation law and Corporations Law purposes (i.e. a body incorporated or formed as a company under a law of the Commonwealth, a State or a Territory).
The amendments will apply from 1 July 1998, the time the Act first applied.
MELBOURNE
15 September 2000
Media contacts: Richard Allsop Assistant Treasurer’s Office (03) 9650 7274
Haydn Daw Australian Taxation Office (02) 6216 2031