Provided that the deduction under paragraph (c) shall not be allowed unless shares representing not less than 90% of the value of the company are held by persons who supply the company with the commodities or animals which the company requires for the purposes of its business.
(2) No such rebate or bonus based on purchases made by a shareholder from the company shall be included in his or her assessable income except where the amount of such purchases is allowable as a deduction in ascertaining his or her taxable income of any year.
(3) It is hereby declared to be the intention of the Parliament that paragraph (1)(c) applies to loans taken out for the purpose of acquiring assets from:
(a) government sources; or
(b) non‑government sources.
(4) No deduction is allowable under subsection (1) to the extent that the assessable income of a co‑operative company is distributed as the franked part of a franked distribution.
(5) For the purposes of this section, in determining whether the assessable income of a co‑operative company is distributed as the franked part of a franked distribution, if:
(a) an amount is distributed by the co‑operative company as a franked distribution; and
(b) the franking percentage (within the meaning of the Income Tax Assessment Act 1997) for the distribution is less than 100%; and
(c) a part of the distribution is attributable to sources other than the assessable income of the co‑operative company;
it is to be assumed that the franked part of the distribution is attributable, to the greatest extent possible, to those other sources.
(6) If a co‑operative company distributes assessable income among its shareholders within the period of 3 months (or such longer period as the Commissioner decides) starting at the end of a year of income, the co‑operative company may elect that the distribution is to be taken, for the purposes of this section only, to have been made on the last day of the year of income.
(7) In this section:
franked distribution has the same meaning as in the Income Tax Assessment Act 1997.
121 Mutual insurance associations
(1) An association of persons formed for the purpose of insuring those persons against loss, damage or risk of any kind is taken, for the purposes of this Act, to be a company carrying on the business of insurance.
(2) The assessable income of such a company includes all premiums derived by it, whether from its members or not.
Division 9AA—Demutualisation of insurance companies and affiliates
Basically, if an insurance company demutualises and its policyholders or members dispose of their listed shares in the company, for tax purposes the acquisition cost of the shares is based on the lesser of:
(a) the embedded value or net tangible asset value of the company; and
(b) the value of the company based on the total first trading day price of all shares in the company.
Other tax consequences result from disposals of other interests and from other events in connection with the demutualisation.
Subdivision B—Key concepts and related definitions
121AB Insurance company definitions
(1) A mutual insurance company is an insurance company:
(a) whose profits are divisible only among its policyholders; or
(b) that satisfies all of the following conditions:
(i) it is limited by guarantee;
(ii) it did not divide its profits among its members during the 10 years ending on 9 May 1995;
(iii) on a winding‑up, its profits are not divisible among its members; or
(c) that satisfies all of the following conditions:
(i) at 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995, it was a friendly society (within the meaning of this Act as in force at that time);
(ii) it was an insurance company on 1 July 1999;
(iii) it does not have capital divided into shares held by its members; or
(d) if the insurance company is a mutual entity (within the meaning of the Corporations Act 2001)—that would be covered by paragraph (a), (b) or (c) if the following were disregarded:
(i) any MCIs (within the meaning of that Act) issued by the entity;
(ii) any dividends or profits paid or payable in respect of such MCIs;
(iii) any members of the entity who are members by virtue of holding such MCIs.
(2) An insurance company is a life insurance company or a general insurance company.
(3) A life insurance company is a company registered under section 21 of the Life Insurance Act 1995.
(4) A general insurance company is a company whose sole or principal business is insurance business within the meaning of subsection 3(1) of the Insurance Act 1973, but does not include a life insurance company.
121AC Mutual affiliate company
(1) A mutual affiliate company is a company that satisfies the following conditions:
(a) it is limited by guarantee;
(b) it is not an insurance company;
(c) at least 75% of the policyholders of a mutual insurance company are members of it;
(d) it did not divide its profits among its members during the 10 years ending on 9 May 1995;
(e) on a winding‑up, its profits are not divisible among its members in their capacity as such.
(2) If the company is a mutual entity (within the meaning of the Corporations Act 2001) then, for the purposes of subsection (1), disregard the following:
(a) any MCIs (within the meaning of that Act) issued by the company;
(b) any dividends or profits paid or payable in respect of such MCIs;
(c) any members of the company who are members by virtue of holding such MCIs.
121AD Demutualisation and demutualisation resolution day
(1) A mutual insurance company demutualises if it ceases to be a mutual insurance company:
(a) in any case—other than by ceasing to be an insurance company; or
(b) if it is a life insurance company—because the whole of its life insurance business is transferred to another company under a scheme confirmed by the Federal Court of Australia.
(2) A mutual affiliate company demutualises if it ceases to be a mutual affiliate company other than by ceasing to be a company.
(3) The demutualisation resolution day, in relation to the demutualisation of a company, is:
(a) if paragraph (b) does not apply—the day on which the resolution to proceed with the demutualisation is passed; or
(b) if paragraph (1)(b) applies to the demutualisation—the day on which the transfer of the whole of the company’s life insurance business takes place.
121AE Demutualisation methods, the policyholder/member group and the listing period
Demutualisation methods 1 to 6
(1) There are 6 methods by which the demutualisation of a mutual insurance company, where a mutual affiliate company is not also demutualised, may be implemented that are relevant for the purposes of this Division. They are described in sections 121AF to 121AK as demutualisation methods 1 to 6.
Demutualisation method 7
(2) There is one method by which the demutualisation of both a mutual insurance company and a mutual affiliate company may be implemented that is relevant for the purposes of this Division. It is described in section 121AL as demutualisation method 7.
Demutualisation methods
(3) Each of the methods described in sections 121AF to 121AL is a demutualisation method.
Policyholder/member group
(4) The policyholder/member group, in relation to the demutualisation of a mutual insurance company under any of demutualisation methods 1 to 6, consists of the following persons:
(a) in the case of a mutual insurance company covered by paragraph 121AB(1)(a)—policyholders (other than trustees covered by paragraph (d) or (e)) in the company immediately before the demutualisation;
(b) in the case of any other mutual insurance company—members (other than trustees covered by paragraph (d) or (e)) of the company immediately before the demutualisation;
(c) in any case—any of the following who, in connection with the demutualisation, are entitled to the same rights to shares or the proceeds of the sale of shares as the policyholders (in a paragraph (a) case) or the members (in a paragraph (b) case):
(i) employees of the company or a wholly‑owned subsidiary of the company;
(ii) persons who ceased to be such policyholders or members before the demutualisation;
(iii) charities;
(iv) persons who are entitled to the rights because of the death of the policyholders or members;
(d) in any case—each person who satisfies the following requirements:
(i) the person is a member of a regulated superannuation fund (as defined by section 19 of the Superannuation Industry (Supervision) Act 1993), other than a standard employer‑sponsored member (as defined by subsection 16(5) of that Act);
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) the trustee of the fund is a company that is a wholly‑owned subsidiary of the mutual insurance company;
(iv) the person’s benefits in the fund consist solely of the proceeds of the policy or policies;
(v) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee;
(e) in any case—each person who satisfies the following requirements:
(i) the person is the member of a single‑member superannuation fund;
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee.
(5) The policyholder/member group, in relation to the demutualisation of a mutual insurance company and a mutual affiliate company under demutualisation method 7, consists of the following persons:
(a) if the mutual insurance company is covered by paragraph 121AB(1)(a)—policyholders (other than trustees covered by paragraph (e) or (f)) in the mutual insurance company immediately before the demutualisation;
(b) in the case of any other mutual insurance company—members (other than trustees covered by paragraph (e) or (f)) of the company immediately before the demutualisation;
(c) members (other than trustees covered by paragraph (e) or (f)) of the mutual affiliate company immediately before the demutualisation;
(d) any of the following who, in connection with the demutualisation, are entitled to the same rights to shares or the proceeds of the sale of shares as the members:
(i) employees of the mutual insurance company, the mutual affiliate company or a wholly‑owned subsidiary of either company;
(ii) persons who ceased to be such members before the demutualisation;
(iii) charities;
(iv) persons who are entitled to the rights because of the death of members;
(e) in any case—each person who satisfies the following requirements:
(i) the person is a member of a regulated superannuation fund (as defined by section 19 of the Superannuation Industry (Supervision) Act 1993), other than a standard employer‑sponsored member (as defined by subsection 16(5) of that Act);
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) the trustee of the fund is a company that is a wholly‑owned subsidiary of the mutual insurance company;
(iv) the person’s benefits in the fund consist of the proceeds of the policy or policies;
(v) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee;
(f) in any case—each person who satisfies the following requirements:
(i) the person is the member of a single‑member superannuation fund;
(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;
(iii) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee.
(6) The listing period is the period ending 2 years after the demutualisation resolution day, or at such later time as the Commissioner, before the end of the 2 years, allows.
121AEA Replacement of policyholders by persons exercising certain rights
If, as a result of the exercise of any power under the articles of association of an insurance company, persons are entitled to exercise rights in place of policyholders, then, to the extent that the Commissioner considers it appropriate, the persons are treated for the purposes of this Division as replacing the policyholders.
121AF Demutualisation method 1
(1) Under demutualisation method 1, in connection with the implementation of the demutualisation:
(a) all membership rights in the mutual insurance company are extinguished; and
(b) shares (the ordinary shares) of only one class in the mutual insurance company are issued to each person in the policyholder/member group; and
(c) the ordinary shares are listed within the listing period.
Note: Other things may also happen in connection with the implementation of the demutualisation.
(2) The following diagram shows, where this demutualisation method is used, the issue of the shares to the policyholder/member group.
A diagram of Demutualisation method 1 used to issue shares to the policyholder/member group
121AG Demutualisation method 2
(1) Under demutualisation method 2, in connection with the implementation of the demutualisation:
(a) all membership rights in the mutual insurance company are extinguished; and
(b) not more than 10 shares (the special shares) in the mutual insurance company are issued to a trustee to hold for the benefit of the policyholder/member group, where:
(i) the issue takes place before the issue of the ordinary shares mentioned in paragraph (c); and
(ii) on the issue of all the ordinary shares, the rights attaching to the special shares become the same as those attaching to the ordinary shares; and
(c) a greater number of shares (the ordinary shares) of only one class in the mutual insurance company are either:
(i) issued, at the election of each person in the policyholder/member group, to the person or to a trustee to sell on behalf of the person; or
(ii) issued to a trustee, at the election of each person in the policyholder/member group, to distribute to the person or to sell on behalf of the person; and
(d) the trustee sells the ordinary shares and distributes the proceeds to the person, or distributes the ordinary shares to the person; and
(e) the ordinary shares are listed within the listing period.
Note: Other things may also happen in connection with the implementation of the demutualisation.
(2) The following diagram shows the main events, where this demutualisation method is used involving an election covered by subparagraph (1)(c)(ii).
A diagram of Demutualisation method 2 showing the main events, where this demutualisation method is used involving an election covered by section 121AG(1)(c)(ii)
121AH Demutualisation method 3
(1) Under demutualisation method 3, in connection with the implementation of the demutualisation:
(a) all membership rights in the mutual insurance company are extinguished; and
(b) shares in the mutual insurance company are issued to another company (the holding company); and
(c) shares (the ordinary shares) of only one class in:
(i) the holding company; or
(ii) another company (the ultimate holding company) of which the holding company is a wholly‑owned subsidiary, either directly or through one or more other wholly‑owned subsidiaries (each of which is an interposed holding company);
are issued to each person in the policyholder/member group; and
(d) the ordinary shares are listed within the listing period.
Note: Other things may also happen in connection with the implementation of the demutualisation.
(2) The following diagram shows the main events, where this demutualisation method is used.
A diagram of Demutualisation method 3, in connection with the implementation of the demutualisation
121AI Demutualisation method 4
(1) Under demutualisation method 4, in connection with the implementation of the demutualisation:
(a) all membership rights in the mutual insurance company are extinguished; and
(b) shares in the mutual insurance company are issued to another company (the holding company); and
(c) not more than 10 shares (the special shares) in:
(i) the holding company; or
(ii) another company (the ultimate holding company) of which the holding company is a wholly‑owned subsidiary, either directly or through one or more other wholly‑owned subsidiaries (each of which is an interposed holding company);
are issued to a trustee to hold for the benefit of the policyholder/member group; and
(d) the issue of the special shares takes place before the issue of the ordinary shares mentioned in paragraph (e), and on the issue of all the ordinary shares, the rights attaching to the special shares become the same as those attaching to the ordinary shares; and
(e) a greater number of shares (the ordinary shares) of only one class in the holding company or ultimate holding company are either:
(i) issued, at the election of each person in the policyholder/member group, to the person or to a trustee to sell on behalf of the person; or
(ii) issued to a trustee, at the election of each person in the policyholder/member group, to distribute to the person or to sell on behalf of the person; and
(f) the trustee sells the ordinary shares and distributes the proceeds of sale to the person, or distributes the ordinary shares to the person; and
(g) the ordinary shares are listed within the listing period.
Note: Other things may also happen in connection with the implementation of the demutualisation.