Senate

Supplementary Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon. P.J. Keating M.P.)

Summary of Proposed Changes

A number of amendments to the Bill are to be moved on behalf of the Government. These amendments relate to changes proposed by the Bill to extend the taxation relief provided for securities lending arrangements by section 26BC of the Income Tax Assessment Act 1936. The effect of the proposed amendments are:

•

securities lending relief will be available where the entitlement to a distribution or rights or options in respect of borrowed securities arises during a borrowing period;

•

a borrower will be able to satisfy a lender's direction to exercise a borrowed right or option by giving the lender securities identical to those that would have resulted if the borrower had exercised the right or option;

•

proposed section 160AQUA will be changed to:

•

provide that the basis for the transfer of franked dividends paid on shares that are the subject of a cum-dividend contract of sale or a securities lending arrangement is to be the obligation that exists at the time the company closes its books to determine dividend entitlements;

•

allow persons who receive franked dividends by the operation of the section to transfer those dividends by another application of that section;

•

lenders who dispose of replacement securities within 12 months will not lose indexation benefits for capital gains purposes where the borrowed securities that relate to the replacement securities were acquired at least 12 months earlier; and

•

the commencement date for proposed Division 6A of Part IIIAA (Transfer of Shareholder Status for Tax Purposes) will be deferred to the later of 1 August 1991 or the first day of the month following Royal Assent