re: Ann: Request from members to hold a gener...
Hi LZA
the first thing to remember is we have a unit trust. The trust in itself never paid tax . The unit holders pay tax on the taxable distributions received from the trust.
The continuity of ownership test is most definitely lost. The same business test means just that same type of business. Now MXQ borrowed and on lent at a margin. The income to the unit holders was the net interest less the operating expenses. If they,as they appear to be, go and do they same thing then any profits will be first deducted from the accumulated tax losses , and its not until the accumulated losses have been extinguished will there be any tax to pay on income distributions by unit holders.
Max has accumulated losses of approx $80m. This includes loans wirtten off , but in MAx's business losses on loans would be considered part of the ordinary course of business and income losses.
So the new MAX could take the capital it raises , probably borrow more and on lend at a margin. Max previously had about $1.1 billion of loan assets and $1billion of borrowed money and $100 million of capital , or about that.
The net income max produces for tax purposes will be taken of the accumulated losses. This will result in the profit not being subject to income tax by unit holders, assuming the trust makes distributions, as they will not be required to as Max will not have a profit after it deducts the accumulated losses.
However it will accumulate cash profits . The only way it could distribute these is via what is called tax deferred distributions . These are essentially returns of capital. Now for anyone who has had MAX for any length of time after the crash , once the final return of capital is made and further returns of capital will no doublt result in them receving more capital back than they have paid for there units( if this hasnt happended already) . this means any distribution to an existing unit holder will be a capital gain . The good thing is you will get the 50% discount .
However new unit holders will have a paid up capital base . Lets say its 20cents. Any tax deferred distributions will reduce the 20 cents cost base before they will pay any tax at all. I trully beleive this is the only reason Alceon are making a play for MAX. They want the tax losses and New unit holders will have the ability to get tax free distributions. On any new units old unit holders buy , they will also get the sam benefit. Its just your original units will have no cost base from which to deduct the tax deffred distributons .
Will they apply to the ATO for recognition of the losses. I am not sure . The Austrlian taxation system is self assessment all the way up. They could prepare the return for MAx and just deduct the losses . They would spend money getting the correct advice. They may simply rely on this and lodge the return and not apply for a ruling. Id be pretty sure they have already recieved postive advice from the big end of town in the accouting world.
Hope this answers your questions . I know its a bit confusing
MXQ Price at posting:
16.0¢ Sentiment: Hold Disclosure: Held
