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.