Scrip for scrip rollover laws amended to include super funds

The Government plans to amend scrip for scrip rollover legislation to bring super funds under the same rules as everyone else regarding the deferral of tax as a result of mergers or takeovers.

The exposure draft contains amendments to ensure that the entity and stakeholder tests connected to scrip for scrip ‘significant' and ‘common' stakeholder assessments apply only to the ownership of relevant interests, rather than who benefits from the ownership.

Treasury said it had been argued that under current legislation, life insurance companies, super funds and trusts could defer tax permanently on the basis that the tests apply only if entities hold the relevant interests ‘for their own benefit'.

It said capital gains tax provisions treated movement by an entity that owned an asset as being done by the underlying entity, but there was uncertainty regarding whether that was sufficient for stakeholder tests to apply to the underlying owner of the relevant interests.

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There was further uncertainty as to how those rules were then applied to the connected entity test which was beyond the boundaries of capital gains tax (CGT) provisions, it said.

The amendments ensure that after a beneficiary becomes absolutely entitled to an asset or a trust, the asset is treated as an asset of the absolutely entitled beneficiary for the purpose of CGT and the connected entity provisions.

Everything that then happened to the asset would be taken into account in working out any CGT consequences in respect of that asset in the hands of the beneficiary, and ensured that the connected entity and stakeholder tests were linked to the beneficiary, it said.

Treasury said the integrity changes that affected CGT provisions would be retrospective to ensure transactions that took place after the announcement were included.