On 6 January 2010, the Australian Tax Office announced proposed changes to the relief available to defer capital gains tax (CGT) liability where a shareholder is paid in shares through a scrip-for-scrip takeover. This relief allows the CGT liability on existing shares to be "rolled over" and deferred until the newly acquired shares are sold.

While this relief has been available before now, a number of conditions had to be satisfied, and the relief was not available, for example, if the takeover offer was not open on substantially the same terms to all shareholders who hold similar voting rights.

Under these proposed changes, certain conditions will no longer need to be satisfied if the transaction is approved under the takeover provisions of the Corporations Act. Accordingly, the circumstances where the relief isn’t available for a takeover conducted under the takeover provisions of the Corporations Act will be significantly reduced.

The proposed changes will apply to takeovers that take place from 6 January 2010 onwards. The ATO is currently conducting a four-week consultation period before releasing the draft legislation for review later in the year.

More information will be provided when the draft legislation becomes available. In the meantime, if you have any questions about the proposed changes or would like to submit your comments to the ATO, please contact HopgoodGanim Lawyers.

Michael Hansel, Partner  
Richard Hanel, Associate
Damian O'Connor, Special Counsel