Tax relief for investors in instalment warrants

This measure treats the beneficiary of an instalment warrant trust as the taxpayer for income tax purposes in relation to the underlying asset in the trust.

In previous announcements, the government proposed to treat:

• the investor in an instalment warrant over an exchange traded security in a company, trust or stapled security as the owner of the listed security for income tax purposes
• a superannuation trustee who enters into a limited recourse borrowing arrangement for the purpose of purchasing an asset, as permitted under former subsection 67(4A) of the Superannuation Industry (Supervision) Act 1993 (the SISA), now sections 67A and 67B SISA, as the owner of the asset for income tax purposes.

However, in the 2011-12 Federal Budget, the government further announced it will extend the look-through treatment beyond single exchange traded securities to include instalment warrants and receipts over:

• direct and indirect interests in listed securities
• unlisted securities in widely held entities
• bundles of these assets.

The changes will confirm the practice of treating an investor in an instalment warrant or instalment receipt over specified assets as the owner of the security for income tax purposes. As a result, there will be no capital gains tax applicable at the time the last instalment is paid for instalment warrants over these types of assets.

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

Media release

For more information, refer to:

• Assistant Treasurer, the Honourable Bill Shorten, media release 008/2011
• the former Assistant Treasurer, Senator the Honourable Nick Sherry, media release 37/2010
• the former Minister for Financial Services, Superannuation and Corporate Law, the Honourable Mr Chris Bowen MP, media release 020/2010.

Administrative treatment We will accept tax returns as lodged in the period up until the enactment of the proposed changes. No compliance action will be taken by us prior to the enactment of the proposed changes. For any queries relating to this measure, contact Jennifer Ostler on (03) 9285 1083.

More information For more information, refer to Budget Measures 2011-12.