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The demutualisation of the life offices (AMP,
National Mutual and Colonial Mutual) has significantly boosted market
capitalisation and increased the number of shareholders over the past fifteen
years. The big advantage for members has been the exchange of an interest
that could not be traded, for shares that are listed on the Australian
Securities Exchange.
However, when they come to sell those shares,
as a general rule, shareholders are subject to Capital Gains
Tax. Even though nothing was paid for the shares, they have a value for
CGT purposes, which is reflected as “Acquisition Cost per share” in
the table below. That acquisition cost may be only a part of the cost
base which can be deducted from the capital proceeds to arrive at
the capital gain. The cost base may also include costs associated with the sale
of the shares such as fees paid to a broker.
Effective 1 July 2007, changes were made
to the law relating to the capital gains tax (CGT) treatment of policy
holders of health insurers who receive cash or shares when their health
insurer demutualises. Under the new law, policy holders disregard any
capital gains and losses that arise when a private health insurer
demutualises . The changes
apply for example to the demutualisation of NIB, MBF and
AHM, see table.
Below is a selection of demutualisations of
the past twenty five years with the more recent demutualisations highlighted:
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DEMUTUALISATIONS 1985 - 2010
Last updated: 21 June 2010
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|
Company |
Acquisition Cost per share |
Acquisition Date |
Notes (see below) |
| AMP Ltd |
$10.43 |
20
November 1997 |
1 |
| Australian Co-operative Foods Limited
|
Cash only |
26 November 2008 |
13 |
| Australian Health Management Group (AHM) |
Cash only |
14 January 2009 |
11 |
| Australian Stock
Exchange Ltd |
N/A |
October 1998 |
2 |
| Canberra Perm BS to Canberra Adv Bank |
N/A |
August 1990 |
3 |
| Capita Financial Group |
N/A |
October 1990 |
3 |
| Civic Co-op PBS to Canberra Advance Bank
|
N/A |
June 1986 |
3 |
| Colonial Mutual
Life Assurance Ltd |
$3.31 |
11
November 1996 |
4 |
| First Provincial Building Society |
N/A |
November 1993 |
8 |
| Hibernian Friendly
Society (NSW) Limited |
$1.162 |
2
September 2002 |
7 |
| Illawarra Mutual Building Society |
N/A |
August 1989 |
8 |
| IOOF Ltd |
$2.53 |
14
June 2002 |
|
| IOR Group Limited |
$1.08 |
1 August 2007 |
12 |
| Ipswich & West Moreton Bldg Society |
N/A |
October 1993 |
3 |
| Mackay Permanent Building Society |
N/A |
May 1993 |
8 |
| MBF Group |
Cash only |
16 June
2008 |
10 |
| Metropolitan PBS to Metway Bank |
N/A |
July 1988 |
3 |
| National Mutual
Life (now AXA) |
$1.14 |
8
August 1995 |
|
| NIB Holdings
Ltd |
$0.85 |
1
October 2007 |
9 |
| Northern Building Society |
N/A |
July 1993 |
3 |
| NRMA Insurance
(NIGL) - allocated |
$1.78 |
19
June 2000 |
5 |
|
- facility |
$2.75 |
6
August 2000 |
6 |
| NSW Building Society to Advance Bank |
N/A |
June 1985 |
3 |
| Over 50s Mutual
Friendly Soc (OFM) |
$1.65 |
12
June 2001 |
|
| Perth BS & Hotham PBS to Challenge
Bank |
N/A |
April 1987 |
3 |
| Pioneer Permanent Building Society |
N/A |
August 1993 |
8 |
| RESI-Statewide BS to Bank of Melbourne |
N/A |
July 1989 |
3 |
| St George Building Society |
N/A |
May 1987 |
8 |
| Sunstate Credit Union to First Provincial
BS |
N/A |
October 1997 |
3 |
| Tasmanian PBS to Tasmanian Bank |
N/A |
September 1987 |
3 |
| The Co-operative BS of SA to Adelaide
Bank |
N/A |
January 1994 |
3 |
| The Rock Building Society |
N/A |
December 1992 |
3 |
| United PBS to National Mutual R Savings
Bank |
N/A |
March 1987 |
3 |
| Wide Bay Capricorn Building Society |
N/A |
December 1992 |
8 |
|
N/A =
Not Available PBS =
Permanent Building Society The
more recent demutualisations are highlighted
Notes:
- The acquisition cost per share of $10.43
applies to Australian residents disposing of AMP shares prior to
the demerger of the UK operations of AMP (to HHG), which took
place in December 2003. All other AMP/HHG shareholders should go
to the ATO website http://ato.gov.au/individuals/content.asp?doc=/content/46226.htm
as the tax consequences of the demerger are too complex to explain
here.
- ASX issued 166,000 shares to each of 606 former
members. There were two categories of members and the Acquisition
Cost or Cost Base is not on the public record. (Shares ended their
first day’s trading at $4.25.)
- For record purposes only.
- ATO advises that under sec 121AA of the
ITAA 1936, where a policyholder disposes of a listed
demutualisation share, the acquisition cost is the lesser of the
‘embedded value” of $3.66 and the listed first day trading price
of $3.31.
- If shares were sold through the Facility
the capital gain per share is the excess of the facility price of
$2.75 over the acquisition cost of $1.78.
- If more shares were purchased through the
Facility the acquisition cost of those additional shares is $2.75
each.
- The Tax Office granted Hibernian/Aevum an extension of time to list its shares after a two year period from it demutualising. Check on the ATO website for the tax concessions available to Hibernian/Aevum shareholders who were Hibernian members.
- Demutualisation via listing on an Exempt
Exchange.
- Policy holders are to disregard the capital
gain that arose as a result of receiving shares
in the demutualisation of NIB. If they subsequently sold
those shares for 85 cents through the share sale facility, or
otherwise, they have nothing to declare. If they subsequently sold
those shares for more than 85 cents thay have a capital gain to
declare (or a capital loss if they sold for less than 85
cents)
.
- Participating Contributors received a cash
entitlement sent by the company on 30 June 2008 - the amount
allocated took into account the type of MBF health insurance
product held by the eligible MBF contributor on 8 November 2007,
such as hospital or ancillary, the scale of the policy they have
held over the years, i.e. Single or Non-Single, and their tenure
as a contributor. Payments representing the balance
of the Residual Pool were posted to eligible contributors on 12
January 2009. Under new tax laws that became effective 1 July
2007, any amounts received by Australian
residents are not subject to income
tax.
- The AHM demutualisation involved the
acquisition by Medibank Private Limited (Medibank) of 100% of the
ownership interests in AHM. Participating AHM Members
were entitled to a cash payment or payments (in total $367m)
in consideration for the cancellation of their membership
interests in AHM. Participating AHM Members can disregard any
capital gain or capital loss and the payments are not subject to
income
tax.
- The demutualisation of IOR Friendly
Society Limited involved, inter alia, the issue of shares in IOR
Group Limited to members of IOR Friendly Society Limited and
to employees of IOR Group. The corporate objective was
a listing with the Australian Securities Exchange (ASX) in 2009.
We understand there are no tax consequences unless those shares
are disposed of, in which case the cost base is the lesser of
the embedded value of IOR Friendly Society Limited (as
calculated by an eligible actuary) or the value
of the company based on the closing first trading day price after
the shares are listed on the Australian Securities Exchange
(ASX). Subsequently the company advised its shareholders that
"at the time of the demutualisation, the estimated value per IOR
share was between $1.10 and $1.30 and the corresponding "embedded
value" tax cost base was $1.08."
- On 21 November 2008, ACF
Co-op converted from a co-operative to a public company and
on 26 November 2008, National Foods, under a Scheme of
Arrangement, acquired all the shares in the new company. We
understand the total consideration was cash of
$5.6533184 per share which was to include a
fully franked special dividend of 59 cents. According to our
interpretation the special dividend is assessable income.
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