Tax change on building soc. shares

Press, 2 June 1981, Page 15

Tax change on building soc. shares

PA Wellington. The Minister in charge of the Inland Revenue Department (Mr Templeton) has warned of a measure to be introduced later this year to counter a form of tax avoidance. An amendment to the Tax Act would prevent building societies converting profits on members’ shares, which are normally taxable, into capital receipts which are not: ‘•Under such an arrangement the member’s shares are purchased by the building society itself a short timebefore the particular group of shares is due to terminate. The amount paid for the shares usually equates with the subscriptions the member has paid over the years' plus the profits which would normally be paid out as a taxable dividend." As it had been found that

the Commissioner of Inland Revenue was unable to tax the profit element of the payment for the shares, specific legislation was-required to ensure that the profits were assessed to the shareholders, said Mr Templeton. The amount received by members in excess of their payment for the shares would become taxable dividends. This would apply to anv such transaction carried out on or after April 1,1981. The secretary of the Building Societies’ Association, Mr Robin Clulec, said that only one building society had been involved in. the practice referred to by Mr Templeton v' "The proposed change to the law. outlined by Mr Templeton, is the direct result of a court decision confirming the legality of the practice. The Government is merely moving to alter this situation;" he said.