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11 Mar 10 Income tax treatment of instalment warrants

In media release No 2010/038, 10 March 2010, the Assistant Treasurer, Senator Nick Sherry, announced that the Government plans to amend the tax law to confirm the practice of treating the investor in an instalment warrant over a single exchange traded security in a company, trust or stapled entity as the owner of the listed security for income tax purposes.

"This will benefit investors in instalment warrants primarily by confirming there is no capital gains tax (CGT) event at the time of the last instalment," the Assistant Treasurer said.

The income tax amendments will apply for assessments for the 2007-08 and later income years.

In addition, in media release No 2010/020, 10 March 2010, the Minister for Financial Services, Superannuation and Corporate law, Chris Bowen announced that the Government proposes to amend the tax law so that a superannuation trustee who enters into a limited recourse borrowing arrangement to purchase an asset, as permitted under s 67(4A) of the Superannuation Industry (Supervision) Act 1993, will be treated as the owner of the asset for income tax purposes.

Initial consultation will be undertaken on the design of these tax amendments with a consultation paper providing further information about this proposal available here

The Government will also release an exposure draft of the legislation at a later date.

The Assistant Treasurer said that this measure complements the announcement also made on 10 March 2010 by Mr Bowen that the Government will amend the Corporations Regulations 2001 to provide that instalment warrants acquired by superannuation funds consistent with the Superannuation Industry (Supervision) Act 1993 are financial products under the Corporations Act 2001.

"The measure will ensure that only licensed financial services providers offer these arrangements to superannuation funds," Mr Bowen said.

To allow product providers time to adjust to the new arrangements, the Regulations would come into effect three months after being made.

 


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