Commonwealth of Australia Explanatory Memoranda

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TAX LAWS AMENDMENT (2007 MEASURES NO. 5) BILL 2007

                                   2004-2005-2006-2007

        THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

                            HOUSE OF REPRESENTATIVES


          TAX LAWS AMENDMENT (2007 MEASURES No. 5) BILL 2007


              SUPPLEMENTARY EXPLANATORY MEMORANDUM

                 Amendment to be moved on behalf of the Government

                              (Circulated by authority of the
                          Treasurer, the Hon Peter Costello MP)




Explanation of amendment

1.1      Schedule 8 to the Bill includes a measure that allows a stapled group of entities
to restructure with an interposed head trust without triggering certain taxation
consequences.

1.2      Under the measure, a restructure that involves interposing a head trust over a
public unit trust stapled to a company will not result in the interposed head trust being
taxed as a company under Division 6C of the Income Tax Assessment Act 1936
(ITAA 1936). The amendments will enable Australian listed property trusts to be
treated as a single entity for the purpose of overseas acquisitions and improve their
capacity to acquire property and property-holding entities offshore.

1.3      Some stapled entities, however, consist of public unit trusts that are stapled to
other trusts that, while taxed as companies, are not companies at law (ie, corporate unit
trusts and public trading trusts taxed under Divisions 6B and 6C of the ITAA 1936).

1.4      Under this amendment, a restructure that involves interposing a head trust that
directly or indirectly controls a public unit trust, which is stapled to a trust that is taxed
like a company under Division 6B or 6C of the ITAA 1936, will also not result in the
interposed head trust being taxed as a company.

1.5    This amendment will ensure that some stapled structures do not gain an
unintended competitive advantage over other structures if they choose to restructure.