Taxation of Private Equity

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1 December 2010 – The Australian Tax Office has confirmed its position that the Private Equity investments in particular gains on sale of shares in Australian companies should be taxed on revenue account as opposed to capital for tax purposes, thereby preventing Private Equity firms from distributing their gains and losses to investors subject to the capital gains tax regime.  The Tax Office’s view is outlined in the finalised Tax Determination TD 2010/21 (previously in draft form TD 2009/D18).

The main impact of the Tax Determination will be felt by non-resident investors and the private equity industry who sought to access preferential tax treatment by flowing investment capital gains to non-resident investors.

The Industry and various professional bodies are now in the process of lobby against the Determinations which are believed to hinder foreign investment and capital inflow into Australia.