Contact: Brett Todd
Deloitte
M&A Tax Partner
+61 (0) 3 9208 7989

Contact: Amanda Kennedy
Deloitte
Media and Communication Manager
+61 (0) 3 9208 7407

The announcement today to restore the long-standing tax treatment of rights issues is a welcome return to the status quo said Deloitte M&A Tax Partner Brett Todd.

“Not only does the announcement remove added complexity and compliance costs for shareholders and companies issuing rights, but it also restores a cost effective capital raising technique for listed entities,” Mr Todd said. 

“The announcement ensures recent proposed changes to the Corporations Act, to streamline the regulatory process of raising capital via rights issues, is not made ineffective by burdensome tax law.

“Whilst the issue has been dealt with in a sensible and commercial manner, it is regrettable it has taken four months of lobbying to reverse what may be seen as an unwarranted impediment to capital raisings.

“Returning to the status quo means shareholders will only be taxed on their capital gains at the time they are realised and not on unrealised and therefore unfunded gains.

“The change also removes what was likely to be an onerous requirement on companies to provide shareholders with a valuation of the rights the shareholders were being issued.”