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ATO Bans Instalment Warrants Over Tax Concerns

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

18 December 2002


The Australian Taxation Office (ATO), in conjunction with the Australian Prudential Regulation Authority (APRA) on Monday banned superannuation funds from making shareholder applications for instalment warrants.

Instalment warrants, according to the Australian Financial Review, enabled the super funds to buy shares by instalment and then convert those shares into cash. This process was found to breach rules prohibiting fund trustees from borrowing money, as under the scheme, investors were able to swap shares for instalment warrants and recive up to 80% of the value as cash for other investments.

According to the ATO, this also often acted as a mechanism for tax evasion, as it allowed investors to avoid capital gains taxes which would otherwise have applied to straight share sales.


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