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  • Announced changes



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    Changes to market value substitution rule for widely held entities

    A Bill introduced into Parliament provides that the market value substitution rule does not apply when CGT event C2 (about cancellations and similar endings) occurs in relation to interests in companies and unit trusts that have at least 300 members or unit holders and that do not have concentrated ownership. Under the existing law, the market value substitution rule replaces the capital proceeds with the market value of the asset that has come to an end, where the proceeds received are more or less than the asset's market value. The changes will ensure that taxpayers who hold interests in these companies or trusts are taxed on gains that are calculated with respect to the amount actually received when CGT event C2 happens to their interest.

    The change to the law applies to CGT events occurring during the 2006-07 income year and later income years.

    Taxation of rights issues

    On 26 June 2007, the then Minister for Revenue and Assistant Treasurer announced changes to the tax law to restore the taxation treatment of rights issues that existed prior to the recent decision of the High Court of Australia in Commissioner of Taxation v. McNeil (2007).

    Shareholders issued with rights by companies seeking to raise capital will not have an income tax liability at the time of issue. Instead, the long-standing position to treat such rights issues on capital account will be maintained under this proposal.

    The announcement proposed that the change to the law would apply from the 2001-02 income year.

    Last modified: 13 Jul 2020QC 27921