MBF Cash Payment – Demutualisation of MBF

Introduction of new law applying to the demutualisation of health insurers

On 26 June 2008, the Government introduced a Bill into Parliament to change the law relating to the capital gains tax (CGT) treatment of policy holders of health insurers who receive cash or shares when their health insurer demutualises.

The proposed changes are contained in Tax Laws Amendment (2008 Measures No. 4) Bill 2008. This Bill will become law when passed by both Houses of Parliament and approved by the Governor General.

Under the proposed law, policy holders will disregard any capital gains and losses that arise when a private health insurer demutualises.

The changes to the law are proposed to take effect from 1 July 2007, and if enacted, will apply to the demutualisation of MBF.

The Tax Office will continue to provide regular updates on the progress of the changes through Parliament, and how they will apply to you.

Taxation treatment of your cash payment from MBF

Until the proposed new law is enacted, there is some uncertainty about what amount, if any, should be included in your tax return as a result of the demutualisation. In light of this uncertainty, the Tax Office will allow you to lodge your 2007/2008 tax return without including any capital gain from the receipt of cash from the MBF demutualisation at this stage.

The Tax Office and MBF will let you know what amount (if any) to include in your tax return and how to do this at a later time.

Frequently asked questions

Will I be affected by the proposed changes when they become law?

Yes. The proposed changes are intended to take effect from 1 July 2007, and if enacted, will apply to the demutualisation of MBF.

What are the tax consequences for me under the proposed changes if I receive a cash payment as a result of MBF’s demutualisation?

When the proposed changes become law there will be no tax consequences for Participating Contributors who receive a cash payment under MBF’s demutualisation. Therefore, the proposed changes will allow you to disregard the amount received when completing your 2007-2008 tax return.