International Law

The Assistant Treasurer has announced that the new Government intends to confirm's the previous Government's policy of providing relief from capital gains tax (CGT) for policyholders of health insurers who receive shares when their health insurer demutualises.

The Government will ensure that policyholders who receive shares will not be subject to a CGT taxing point at the time they receive the shares.The Government also intends to provide relief from CGT for transactions that relate to the mechanism that allows policyholders to receive shares.

Issued shares will be held on trust for ?lost policyholders', who, for example, are unable to receive shares because they reside overseas or have not agreed to receive their shares.  This framework will facilitate the issue of shares to the trustee and the transfer of shares from the trustee to policyholders without adverse or advantageous CGT consequences to either the trustee or the policyholder.

The Government will also provide policyholders with a cost base for their shares that is based on their share of their health insurer's net tangible assets. Pre?CGT policyholders will receive a market value cost base. A similar ?net tangible assets' based cost base will also be provided for any rights that post?CGT policyholders surrender for a cash payment, rather than shares, as part of their health insurer's demutualisation.

Legislation giving effect to this measure will be introduced as soon as practicable, following consultation on the design and the implementation of the amendments. A discussion paper will be released shortly.

The changes will apply from 1 July 2007.