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					                                                                                           Published 11th June 2007
                                                                                           Money & You section, Page 85




SHARES


 Anger at
$5 billion
tax ruling
  By KARINA BARRYMORE           joined the growing list      of     According to the Austral-        time they are granted rather
                              critics of the proposed new         ian Stock Exchange, there than the time they are sold.
      SMALL shareholders tax treatment.                           were about 90 renounceable           "Even if they allow the
       may be cut out of up     "It will mean that compa-         rights issues made during the      right to lapse it still looks as if
       to $5 billion worth of nies will raise capital by place-   past 12 months.                    they are saying it will be
       new share issues each merits to institutions and the         Some of the larger compa-        counted as assessable
year after a controversial opportunity for a company to           nies included Beach Petro-         income," Mr Greco says.
Australian Tax Office ruling. allow all its shareholders to                              According to stockbroker
                                                                  leum, Queensland Gas, Wat-
  The move, criticised within   participate on equal terms pac, Argo Investments, Nylex wise-owl.coin, the tax change
the sharemarket industry, is    will have been changed very       and Roc Oil.                creates an uneven market for
now the subject of growing adversely," Mr Goode says.               Taxpayers Australia chief shareholders.
calls to the Federal Govern-     The move will make the           executive Tony Greco says it         "Rights issues foster a level
ment to override the ATO.      sharemarket more institu-          appears shareholders would         playing field among investors
  The ruling on the upfront tional and discourage ordin-          be taxed at the front end of       by providing all existing
taxation of renounceable ary or public shareholders               the potential share issue,         shareholders the same oppor-
share issues effectively from taking up their right to            even if they don't actually        tunity to participate in a capi-
means it will no longer be the new shares, he says.               buy the shares.                    tal raising, regardless of the
viable for many ordinary         Renounceable issues are                                             size of their bank account,"
mum and dad shareholders also an important source of                "They are going to be con-
to take part in these issues.  funds, especially for medium-      cerned they will get taxed at      the wise-owl analyst Tim
  A renounceable right is an size companies, Mr Goode             the time the right is granted,     Morris argued.
offer from a company to its says, which would now have            even if they don't take it up,"     "As tax is the biggest single
shareholders to buy more to rethink this strategy.                Mr Greco said.                     factor affecting shareholder
shares, usually at a discount.   The tax ruling has the             '"Shareholders are going to      returns, the ATO's proposal
Shareholders can act on the potential to discourage com-          be horrified when they are         diminishes the benefits asso-
rights and buy more shares, panies from raising new capi-         told their rights issue entitle-   ciated with rights issues from
they can sell them on the tal through this popular ment will be included in their                    a board and shareholder's
market, or they can let their method because of the con- accessible income this year.                perspective.
rights expire.                cern that their ordinary "It will mean that many                         "As a result small share-
  Australian stockbroking shareholders will not be will- probably won't participate in               holders will have even less
heavyweight and ANZ chair- ing to take up shares which any rights issues knowing                     access to investment oppor-
man Charles Goode has are offered this way.              they will have to pay tax at the            tunities," Mr Morris said.




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