MUM and dad investors who took advantage of the Halifax Bank of Scotland takeover offer for BankWest shares could face a capital gains tax liability.
Rumours abound that the Australian Tax Office’s beefed up audit squad will be looking at the tax returns of BankWest shareholders to see if they have declared the capital gains they would have made on the share sales.
An ATO spokeswoman refused to comment on the rumours, citing Section 16 of the Tax Act that prohibits the tax office from making any statements about activities revolving around personal taxpayer matters.
Indeed, it is not difficult for the ATO to look into how many BankWest shareholders paid capital gains after taking part in the Halifax takeover.
The company’s share registry is a public document and after that is obtained it is simply a matter of the ATO checking names and returns for payment of capital gains.
If the investors accepted the HBoS offer pre June 30 that could mean a capital gains tax liability for the 2002-03 financial year.
If they accepted the offer after June 30 the capital gain will need to be reported when they come to file their 2003-04 tax return.
If they held the share for more than 12 months they will receive a 50 per cent capital gains tax discount.
RSM Bird Cameron partner Rami Brass said there was a capital gain attached to the sale of the BankWest shares to Halifax.
“A lot of people, mostly mum and dad investors, bought shares at about $2.15. Halifax offered $4.35 for those shares so they could be facing quite a capital gains tax bill,” Mr Brass said.
“The only saving grace for them at the moment is that the takeover was done after year’s end so it won’t affect them for this tax return.
“A lot of people out there don’t think that the ATO will look at them because it’s only $15,000 or so but really it is not a big exercise for them.
“How hard would it be to go through the share registry and make sure they get all of the capital gains tax owing to them?”
Barrington Partners partner Roger Sullivan said the ATO had undertaken similar investigations in the past.
“Back in 1970-71 ATO staff went to all of the brokerage houses during the nickel boom and photocopied their ledger books so they could check to make sure share traders were paying their taxes,” he said.
“This is the sort of stuff the ATO should be able to do pretty easily with the technology it has at its disposal these days.”
Mr Sullivan said most of the capital gains tax liabilities were likely to come up for investors in the 2003-04 financial year and the payment would probably fall due in 2005.
However, he said, if investors had taken the Halifax offer before June 30, they would have the capital gains tax liability falling due in this year’s tax return.
This could prove problematic given that most individual tax returns had to be filed by October 31.
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