Govt confirms CGT position on instalment warrants

The Federal Government has clarified the capital gains tax (CGT) position with respect to investments in instalment warrants.

The Assistant Treasurer and Minister for Financial Services, Bill Shorten, said that changes to be implemented by the Government via legislation later this year would confirm there is no capital gains tax applicable at the time the last instalment is paid for instalment warrants.

The move represents an extension of the range of assets covered by the Commonwealth’s so-called 'income tax look through' treatment for instalment warrants.

Shorten said the decision to expand the coverage of the look through treatment had followed industry consultation which had prompted it to agree that the arrangement should be extended beyond single exchange traded securities.

The Government had previously announced changes to the income tax laws to confirm the practice of treating an investor in an instalment warrant over a listed security as the owner of the security for income tax purposes.

Shorten said that if the changes had not been introduced then, on a strict interpretation of the law, investors who purchased instalment warrants over unlisted securities in widely held entities would have to pay capital gains tax when they paid their last instalment.

However, he pointed out that superannuation trustees who entered into limited recourse borrowing arrangements would be treated as the owner of the asset for income tax purposes.