Jurisdiction - Australia
Australia – Abbott Government’s Proposals For M&A Tax Measures.

11 December, 2013




  • In September, a number of tax measures relevant to M&A were announced but not enacted by previous Governments.
  • On 6 November 2013, the Treasurer and Assistant Treasurer released the Abbott Government’s position in relation to a number of these measures, some of which were subject to consultation ending prior to 1 December.

As at the date the last Parliament was dissolved for the September election, more than 100 proposals for amendments to tax law had been announced but not yet enacted. Most of these measures were announced while the ALP was in Government, although some stemmed back to the Howard era of the early 2000s.


On 6 November 2013, the new Treasurer and Assistant Treasurer set out the Federal Government’s proposals for those tax measures. While some previously announced measures will be continued, others have been rejected, and still others remain under investigation following a ‘speed consultation’ which ended prior to 1 December.


The final outcome for the measures subject to the ‘speed consultation’ has yet to be confirmed, although the Treasurer and Assistant Treasurer noted in their 6 November announcement that the starting position is that these measures will not be proceeding unless the Government is convinced otherwise.


Set out below is a short list of measures relevant to M&A, along with their current announced status.


For those the subject of the consultation process, it is hoped their fate will be known soon – the 6 November announcement suggested that would be 1 December, but that date clearly has not been met.


Details Of Proposed Measure Status
Demergers – ensures a capital gain cannot arise for the head entity on the demerger and provides a choice of outcomes in relation to the tax costs for the assets of the demerged group. Subject to further consultation
CGT for non-residents – expands the meaning of real property for purposes of taxing non-residents on sale of shares. Proceeding and will take effect from 14 May 2013. 
CGT – scrip for scrip roll-over –amends existing ‘integrity provisions’ to ensure that where a trust, superannuation fund or insurance company is a ‘significant stakeholder’ or ‘common stakeholder’, the rollover of cost base rules work appropriately. Proceeding and will take effect from 10 May 2011. 
CGT – earn out arrangements – reforms taxation of earn outs so tax on receipt of earn out payment relates to disposal of underlying asset Subject to further consultation. This measure was to take effect from May 2010. If this measure doesn’t proceed then the Government has announced that it will legislate ‘protection’ for taxpayers that have relied on the announcement. The proposed measures have been referred to in the tax section of a number of public deals such as Sportingbet’s acquisition of Centrebet and the Charter Hall Office REIT transaction.
Debt deductions – changes to ‘thin capitalisation’ rules to reduce allowable debt to equity gearing ratio from 3:1 to 1.5:1. Proceeding and will take effect from 1 July 2014.
CGT for non-residents –introduces withholding regime for purchasers of Australian real property interests from non-residents Proceeding and will take effect from 1 July 2016 
Off-market share buy-backs –reforms off-market buy backs, including by removing the existing cap on the size of the discount available on an off-market buy-back, removing the ‘artificial’ capital loss that may arise under the existing rules and legislating the ATO’s existing practices. Subject to further consultation.


herbert smith Freehills 


For further information, please contact:


Daniel Sydes, Greenwoods & Freehills
[email protected]


Homegrown Tax Law Firms in Australia


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