This information applies to you if you had a private health insurance policy with NIB on 20 March 2007 and received, under the demutualisation of NIB on 1 October 2007, either:
- shares, or
- a cash payment from the sale of shares by participating in the Pre-Listing Share Sale Opportunity (share sale facility).
If you are an eligible policyholder and have verified your details with NIB, you will have been issued shares in NIB Holdings.
Eligible policyholders also had the opportunity to sell their shares through a sale facility before NIB was listed on the Australian Securities Exchange (ASX). Eligible policyholders who elected to sell their shares through the share sale facility did not hold any shares when NIB listed on the ASX.
NIB was listed on the ASX on Monday 5 November 2007.
The law relating to the capital gains tax (CGT) treatment of policy holders of health insurers who receive cash or shares when their health insurer demutualises has recently been changed. The changes take effect from 1 July 2007 and apply to the demutualisation of NIB.
Under the new law, policy holders must disregard capital gains and losses that might otherwise arise as a result of receiving cash or shares under the demutualisation. The new law also provides rules for working out the CGT cost base (or reduced cost base) of shares received under a demutualisation and their time of acquisition for CGT purposes.
The changes are contained in Tax Laws Amendment (2008 Measures No. 4) Act 2008.
NIB policy holders must disregard the capital gain or a capital loss (if any) that arose as a result of receiving shares as a result of the demutualisation of NIB.
However, any sale of those shares during the 2007–08 income year is a CGT event that may give rise to a capital gain or capital loss.
Frequently asked questions:
Yes. The new law takes effect from 1 July 2007 and applies to the demutualisation of NIB.
You will not have to show a capital gain in your 2007–08 tax return because you received shares in NIB as a result of its demutualisation.
You will need to request an amendment to your 2007–08 tax return to exclude the capital gain amount. For information on how to request an amendment to your tax return, refer to Amending your tax return.
You may have sold your NIB shares on or before 30 June 2008 in one of the following ways:
- by participating in the share sale facility
- by selling your shares on the Australian Securities Exchange (ASX), or
- by selling them privately.
The first element of the cost base (or reduced cost base) of each of the shares issued is its market value on the day it was issued to you. The Tax Office accepts that the market value of NIB share on this day was 85 cents.
You acquired your NIB shares for CGT purposes on 1 October 2007.
If you sold your NIB shares through the share sale facility, NIB Holdings Ltd will have sent you the proceeds on 2 November 2007. The amount you received was 85 cents per share. This means that you did not make a capital gain or loss on your shares and have nothing to declare in your 2007–08 tax return as a result of the demutualisation.
If you sold your shares on the ASX, the proceeds will be the amount you received.
For example, if you sold your shares on the ASX for $1.00 each, your capital gain would be 15 cents for each share (less any sale costs). This amount should be declared on your 2007–08 tax return as a capital gain. Conversely, if you sold shares for 80c you would have made a capital loss of 5 cents (plus selling costs).
For more help in working out your capital gain or loss, refer to the Capital gains tax essentials.
No. The CGT discount is only available for capital gains made from a CGT asset that was acquired at least 12 months before the CGT event. As you acquired your NIB shares for CGT purposes on 1 October 2007, you do not qualify for the CGT discount if you sold your shares on or before 30 June 2008.
If you still held your NIB shares as at 1 July 2008, you will not have made a capital gain or capital loss from the shares in the 2007–08 year. However, you will need to maintain records of your CGT cost base for the shares and their time of acquisition for CGT purposes.
The first element of the cost base (or reduced cost base) of each of the shares issued is its market value on the day it was issued to you. The Tax Office accepts that the market value of a NIB share on this day was 85 cents.
You acquired your shares for CGT purposes on 1 October 2007. The acquisition date is relevant for working out whether you are entitled to the CGT discount on any capital gain you make when you dispose of your shares.
If you were a foreign resident at the time of the demutualisation, you must disregard any capital gain or loss that arises from receiving NIB shares under the demutualisation or cash under the sale facility. As long as you remain a foreign resident, you should disregard any capital gain or loss from a later sale or disposal of your NIB shares.
You should seek specialist advice on whether the demutualisation, or later a sale of your NIB shares, has any tax implications for you in your country of residence.
For more information, see:
Last Modified: Tuesday, 6 October 2009
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