|
Share buyback proceeds ruled taxable by High Court |
|
|
Share buyback proceeds ruled taxable by High Court22 Feb 2007 - The High Court has upheld a ruling that proceeds from a share buy-back scheme are taxable income..
In the test case, Commissioner of Taxation versus Helen Mary McNeil, the High Court said the $514 Ms McNeil received as the difference between the St George share buy-back price and the market price was taxable.
In 2001 St George announced a $375 million buy-back of ordinary shares, where for every 20 shares held, St George would issue one "sell-back right" valued at $16.50, higher than market value at the time.
Ms McNeil held 5,450 shares, meaning she had 272 sell-back rights. The difference between the share buy-back price and the market price meant the value of Ms McNeil's sell-back rights at the listing date was $514.
Shareholders could sell their shares back to St George or sell the sell-back rights on the Australian Stock Exchange.
Ms McNeil made no election.
This meant that St George Custodial, holding the sell-back rights as trustee, was obliged to sell those rights to merchant bank Credit Suisse First Boston.
Shareholders such as Ms McNeil who gave no directions about their entitlements were paid the proceeds of trading the sell-back rights on their behalf by CSFB and retained their shares.
On April 2, 2001, Ms McNeil received her portion of the proceeds, $576.64. Of that amount, $62.64 was the increase in the realisable value of the sell-back rights, which Ms McNeil had already conceded was assessable income as a capital gain.
Source: Share buy-back proceeds taxable: court
|
You are at 
