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Improvements to the company loss recoupment rules



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Improvements to the Company Loss Recoupment

Rules

NO.044

The Assistant Treasurer,

Senator the Nick Sherry, today released Exposure Draft legislation and

explanatory

material to improve the company loss recoupment rules in Australia.

These laws implement changes

to the company loss recoupment rules that will improve the operation of the

"continuity

of ownership test" where a company has an unfixed share structure.

The "continuity of ownership

test" broadly requires that shares carrying more than 50 per cent of

all voting,

dividend and capital rights be beneficially owned by the same persons

at certain test times.

"The proposed amendments are

beneficial as they will make it easier for companies to satisfy the continuity

of

ownership test, and therefore to use losses," said the Assistant Treasurer.

Companies which have shares

on issue with unequal rights to dividends, capital distributions or voting

power may

technically fail the continuity of ownership test under the current

law, even though there is no significant change in

underlying beneficial

ownership during the test period.

The proposed amendments will

allow a company which fails the continuity of ownership test because it has

shares with unequal rights to dividends, capital distributions or voting power

to reapply the test by disregarding

debt interests and secondary classes of

shares. If the company still fails, the test can be further applied by fixing

the dividend and capital rights of the principal class of shares.

Technical amendments will

also be made to modify the definition of voting power and clarify the operation

of the

same business test for consolidated groups.

The Government values the

input provided by interested parties through consultation and is seeking

submissions

on the Exposure Draft legislation and explanatory material.

Copies of the consultation materials are available

at

www.treasury.gov.au

and

submissions close on 2 October

2009.

CANBERRA

4 September 2009