Peter Dutton MP, Minister for Revenue and Assistant Treasurer, has announced proposed amendments to the income tax law to restore the
long‑standing taxation treatment of rights issues.

“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 rights issues on capital account will
be maintained”, Mr Dutton said.

Some consequential
amendments will be made to the capital gains tax rules to ensure that
rights issued by companies are treated consistently.

“These
amendments will provide certainty for taxpayers by restoring the
taxation treatment of rights issues that existed before the decision of
the High Court of Australia in Commissioner of Taxation v McNeil [2007] HCA 5”, Mr Dutton said.

“The bring-forward of a tax liability under McNeil’s case would impose unnecessary compliance costs on companies and their shareholders.”

The amendments will overrule ATO Class Ruling CR 2007/42 issued after the McNeil decision.

The amendments will apply from the 2001-02 income year. This will prevent any adverse application of McNeil’s case to companies and their shareholders.

The Government will consult with stakeholders on the development of legislation to implement the changes.