Trustees need to know about the intended changes to the taxation of overseas share investments announced by the Government last month, and how these are likely to affect them.

It is proposed that overseas share investments (except in Australian listed companies) will be subject to tax on unrealised gains in value.  Appreciation in value caused both by share price increases and currency fluctuations will from 1 April 2007 be liable to this capital gains tax.

However, these rules will not apply to individuals if the original cost of shares was less than $50,000.

Trustees should be particularly aware that this $50,000 exemption does not appear to apply to Estates and Trusts.  This means that all overseas share investments held by trustees (except in Australia) will be liable to the proposed capital gains tax.  In light of this, Trustees will have to consider very carefully whether or not a trust’s overseas investments should continue to be held.

While Trustees probably should not take any action until the legislation has actually been passed, all trustees need to be on the alert, and to be ready to review the investments held by any Trust or Estate that they administer.