Demutualisation of Non-Insurance Mutual Entities

The Assistant Treasurer, Senator Rod Kemp, today announced that the Government will introduce legislative amendments that will allow a non-insurance mutual entity to apply a new demutualisation method. This will allow shares in the demutualised entity to be issued to members of the mutual entity and to a holding company where all the shares in the holding company must be issued to members of the mutual entity.

The Government has already legislated to ensure that members of mutual entities, 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 members of mutual entities that prefer to use the new demutualisation method, which is a hybrid of two existing demutualisation methods.

The Government’s amendments will ensure that no capital gains tax (CGT) taxing event arises as a result of members giving up their membership rights when a mutual entity demutualises.

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

CANBERRA
17 November, 1999