NO.015

Today I am announcing the Government’s tax treatment of the wool stockpile

that will apply to the new company, WoolStock Australia. The Minister for Agriculture,

Fisheries and Forestry and the Minister for Finance and Administration are confirming the

privatisation of the wool stockpile in a separate press release today.

The Government considers it appropriate to exempt WoolStock Australia from income tax

on its stockpile disposal activities. This tax treatment reflects the particular

circumstances of the wool stockpile privatisation and differs from the existing “rule

the books” approach which ordinarily applies to the trading stock of a transition

entity under Subdivision 57-L of the Income Tax Assessment Act 1936. (A transition

entity is an exempt entity that becomes taxable.)

Distinctive features of the wool stockpile privatisation are:

• it involves the disposal of a frozen stockpile of trading stock (rather than the

  ordinary stock turnover of an ongoing business concern); and

• it involves no change in the ultimate ownership of the stockpile – wool growers

  with units in the stockpile pre-privatisation are also the owners post-privatisation.

  WoolStock Australia will sell the stockpile and distribute the returns to wool growers.

This treatment is consistent with the Government’s policy objective of placing

control of commercial decisions about the sale of the wool stockpile in the hands of the

unitholders in a way that protects their existing rights. It ensures that net returns from

the disposal of the wool stockpile will continue to be taxed only once to these

unitholders at their marginal tax rate.

The Government will make this tax treatment available to other transition entities that

are in similar circumstances to the wool stockpile privatisation.

30 March 1999

Contacts:

Greg Janes (Australian Taxation Office)

BH: (03) 9275 2937

AH: (03) 9848 9542

Stewart Jones(Treasury)

BH: (02) 6263 4402