Capital change eases declaring a share a dud

Stuart Wilson

The Australian

18 May 2004

Budget rules on tax simplify methods and save time for investors

SHAREHOLDERS will welcome the budget announcement that the capital gains tax rules are to be simplified to allow any insolvency practitioner to declare a share worthless.

As a general rule, shareholders have not been entitled to claim a capital loss on dud shares until a liquidator has declared there will be no return to shareholders.

A failed company can languish in receivership or administration for many years -- particularly where litigation is involved -- before it passes into the hands of a liquidator for winding up. The delay in issuing the appropriate declaration has been the source of considerable frustration to shareholders.

The Australian Shareholders Association has been lobbying for this change and believes it will remove a significant disincentive to invest in securities. The measure will become effective when legislation is passed and an insolvency practitioner then makes a declaration.

It is important to note the measure is not retrospective and will require that a receiver or administrator refresh any such declaration previously issued. This will only be possible after the enabling legislation receives Royal Assent.

With the financial year-end now in sight, shareholders should be looking to take advantage of any capital losses in their portfolio.

The website delisted.com.au is a useful source of information to shareholders in failed companies.
This is a free site, where shareholders can determine the fate of delisted companies, follow the progress of administrations, receiverships and liquidations, confirm takeover and merger consideration, check for unclaimed monies and follow class actions against companies.

This website also carries liquidators declarations for many companies including Pan Pharmaceuticals, Harris Scarfe, HIH, One.Tel, Centaur Mining, New Tel, Seafood Online, Cinema Plus, Normans Wines and Satellite Group.

These declarations can be downloaded and printed off to substantiate a tax claim. Deregistration of a company is also a CGT event allowing a shareholder to claim a capital loss.

Deregistration is the final act, signifying that the company no longer exists.

The website delisted.com.au provides deregistration confirmation for almost 400 previously listed entities, including companies such as Bibury, Forbio, Giant Resources, Panfida and Qintex.

Also, delisted has just announced it will acquire parcels of shares for a nominal amount in some 55 companies where at present shareholders have no other means of crystallising a loss for tax purposes in the current financial year. In most cases, a fee of $76 will apply.

A further improvement to the CGT rules will provide for automatic roll-over for mergers of superannuation funds that happen as a result of new licensing requirements for trustees under the Government's new superannuation safety arrangements.

This measure will ensure there are no capital gains tax consequences when funds merge. The liability will arise only on the subsequent disposal of the assets by the successor entity.

The only other budget changes of significance to investors affect DIY super. Members of self-managed accumulation funds will no longer be able to forfeit the vesting of benefits, which was occurring when members ran close to reasonable benefit limits. Super contributions will have to be fully vested to the member's account.
And funds that have been offering defined benefit arrangements including pensions will in future be required to have at least 50 members.