Taxation of Call Options Issued by Companies

The Government has confirmed that it will amend the income tax law to restore the long‑standing taxation treatment of call options issued by companies. Call options are routinely used by companies as a mechanism for raising capital from their shareholders.

The amendments will provide certainty for taxpayers by restoring the taxation treatment of call options issued by companies that existed before the decision of the High Court of Australia in Commissioner of Taxation v McNeil [2007] HCA 5.

The bring-forward of a tax liability for call options under McNeil's case would impose unnecessary compliance costs on companies and their shareholders.

The amendments will apply from the 2001-02 income year. This will prevent any adverse application of McNeil's case to companies and their shareholders.

Legislation to give effect to this announcement will be introduced as soon as practicable.

8 April 2008