Australian Government Introduces Tax Bill

by Mary Swire, Tax-News.com, Hong Kong

22 July 2008

The Australian government has introduced a new bill into parliament that will amend tax law in the areas of private healthcare and family trusts

Assistant Treasurer Chris Bowen announced on Monday that the Tax Laws Amendment (2008 Measures No. 4) Bill 2008 would implement a number of improvements to Australia's taxation system by easing capital gains tax rules for private health insurance policyholders and reversing changes to family trust tax laws introduced under the previous government.

Under the first provision, the Bill provides relief from capital gains tax (CGT) for private health insurance policyholders when their insurer demutualises to a for profit insurer. The amendments ensure that policyholders who receive shares in the insurer or a cash payment will not be subject to CGT at the time they receive the shares or cash payment.

The government argues that the changes will provide certainty to policy holders of health insurers that demutualise.

Under the second provision, the bill reverses two of the family trust changes introduced by the Tax Laws Amendment (2007 Measures No. 4) Act 2007. The new amendments restore the previous definition of 'family' in the family trust election rules by limiting lineal descendants to children or grandchildren of the test individual or of the test individual's spouse.

The amendments also prevent family trusts from making a variation to the test individual specified in a family trust election, other than specifically in relation to the 2007-08 income year or in the case of a marriage breakdown.

Bowen also announced that the bill implements various other minor amendments to the law in line with the new government's commitment to "the care and maintenance of the tax system," although he did not detail these other amendments in his statement.

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