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If you hold a policy in an insurance company that is demutualising, you may be subject to capital gains tax. The insurance company may give you an option either to keep the share entitlement or to take cash by selling the shares under contract through an entity set up by the company. If you choose to keep the shares, you will not be subject to capital gains tax until you eventually sell them. However, if a cash option is available and you take it, you need to include any capital gains in your tax return in the income year in which you entered into the contract to sell the shares, even though you may not receive the cash until a later income year. There are similar rules if you are a member of a non-insurance organisation which demutualises.
Last modified: 18 Sep 2009QC 18323