Notice of Rulings

Overview

The Commissioner of Taxation, Chris Jordan, has issued three rulings under the Taxation Administration Act 1953 to provide clarity and guidance on specific tax issues related to certain investment schemes. Ruling CR 2018/49 pertains to the scrip-for-scrip roll-over concerning the acquisition of units in the SGH Professional Investor Micro Cap Trust by the SGH Emerging Companies Fund, effective from 1 July 2018 to 30 June 2019 and continuing for entities that entered the scheme within the ruling period. Ruling CR 2018/50 addresses the tax implications for holders of shares in Insurance Australia Group Limited's distribution and share consolidation, also effective from 1 July 2018 to 30 June 2019 and applicable to entities who participated in the scheme during the ruling period. Finally, Ruling CR 2018/51 outlines the tax position for holders of ordinary shares in Folkestone Limited's scheme of arrangement and special dividends, effective for the same period and applicable to participating entities thereafter. These rulings aim to ensure taxpayers have a clear understanding of their tax obligations in these specific circumstances, thereby enhancing compliance and reducing disputes.

Scope and Application

The Commissioner of Taxation has issued several rulings under the Commonwealth's tax law to clarify the tax treatment of specific financial arrangements for entities involved in particular schemes. Ruling CR 2018/49 provides clarity on the income tax implications for entities that have acquired units in the SGH Professional Investor Micro Cap Trust through a scrip-for-scrip roll-over. This ruling applies to entities that entered into the specified scheme between 1 July 2018 and 30 June 2019, and it remains applicable to these entities even after the specified period. Similarly, Ruling CR 2018/50 addresses the tax consequences for entities that hold shares in Insurance Australia Group Limited following a distribution and share consolidation, also applying to those who participated in the scheme during the ruling’s term. Ruling CR 2018/51 concerns the tax treatment for entities that hold ordinary shares in Folkestone Limited following a scheme of arrangement and the issuance of special dividends, with the same temporal applicability as the other rulings. These rulings are instrumental in providing certainty and guidance to entities navigating complex tax scenarios.

Key Provisions

The three rulings issued by the Commissioner of Taxation provide specific guidance on particular tax issues relating to income tax. CR 2018/49 deals with the scrip for scrip roll-over concerning the acquisition of units in the SGH Professional Investor Micro Cap Trust by the SGH Emerging Companies Fund. This ruling sets out the Commissioner's position on this matter and applies from 1 July 2018 to 30 June 2019, and continues to apply after 30 June 2019 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. Similarly, CR 2018/50 addresses the tax implications of the Distribution and Share Consolidation by Insurance Australia Group Limited, while CR 2018/51 outlines the Commissioner's stance on the Scheme of Arrangement and Special Dividends by Folkestone Limited. Both of these rulings apply from 1 July 2018 to 30 June 2019 and continue to apply to all entities within the specified class who entered into the specified scheme during the term of the Ruling. The rulings impose obligations on the entities involved in the schemes outlined in the rulings. These entities must comply with the Commissioner's position on the tax implications of the schemes. For example, in the case of CR 2018/49, entities involved in the acquisition of units in the SGH Professional Investor Micro Cap Trust by the SGH Emerging Companies Fund must adhere to the Commissioner's position on the scrip for scrip roll-over. This includes ensuring that the relevant tax treatments are applied correctly to the transactions and any income generated from these transactions. The same obligations apply to entities involved in the Distribution and Share Consolidation by Insurance Australia Group Limited and the Scheme of Arrangement and Special Dividends by Folkestone Limited. There are no explicit offences, penalties, or civil/criminal consequences mentioned in the rulings for non-compliance with the Commissioner's position. However, failure to adhere to the rulings may result in the Australian Taxation Office (ATO) taking action against the entities involved. This may include reassessing the entities' tax positions, imposing additional taxes, penalties, and interest, or even pursuing legal action in cases of deliberate non-compliance or tax evasion. It is crucial for entities involved in these schemes to carefully consider the Commissioner's position and ensure that they comply with the relevant tax obligations to avoid any potential consequences.