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  • Discussion paper: Buy-back or redemption of certain hybrid securities

    We have released a discussion paper regarding a potential practical compliance approach for determining the market value of certain hybrid securities when bought back or redeemed (as relevant) from an investor holding their hybrid securities on capital account. Feedback is welcome until 11 March 2020.

    The purpose of this paper is to facilitate consultation between the ATO and the community, as part of the process of developing advice on the application of the tax law. We want your view on matters including, but not limited to the following:

    • What hybrid securities should we cover by any practical compliance approach the ATO may adopt? Should it only cover hybrid securities that qualify as Additional Tier 1 capital and listed on the Australian Stock Exchange? Should it extend to any ASX-listed hybrid security where the terms allow for redemption or buy-back on a specified date (including hybrid securities that are debt interests)? Should we cover unlisted (e.g. wholesale) hybrid securities?
    • If the scope of any practical compliance approach should extend beyond hybrid securities that qualify as Additional Tier 1 capital, is the requirement to establish that there is an expectation by the market (prior to an announcement) that a hybrid security will be redeemed or bought back (as relevant) on its specified call date practical and easy to establish?
    • Is it otherwise clear what hybrid securities we would cover by any practical compliance guidelines?
    • Do you think the valuation methodologies proposed by the ATO are reasonable and practical to apply?
    • Do you think the proposed modified VWAP methodology where ASX-listed hybrid securities redeemed or bought back before their scheduled call date is reasonable, and do you expect it to be generally applied?

    What you should do

    We encourage you to have your say by reading the discussion paper and providing your comments to Katherine Leung at katherine.leung@ato.gov.au by 11 March 2020.

    For more information you can email us at PGIAdvice@ato.gov.au

    Last modified: 13 Feb 2020QC 61397