Newcrest Mining Limited 20 May 2009

Transcription

1 Newcrest Mining Limited 20 May 2009 Update of Australian tax implications for Newcrest Retail Shareholders from the 7 for 20 Entitlement Offer in October 2007 A general summary of Australian taxation implications for Eligible Retail Shareholders who hold shares on capital account from the October 2007 capital raising was set out on pages of the Prospectus for the 7 for 20 Entitlement Offer dated 17 September A copy of this tax commentary is attached. The Australian taxation treatment of rights issues has been uncertain following the February 2007 High Court decision in McNeil s case. The Australian Government introduced draft tax law into Parliament on 29 May 2008 that addresses certain tax implications of rights issues. However this law, which had not been enacted by 30 June 2008, does not specifically address the tax treatment of the cash amount of $10.60 per entitlement received by non-participating retail shareholders. In order to provide certainty to shareholders, Newcrest applied for a Class Ruling from the Australian Tax Office ( ATO ) for its retail shareholders who hold shares on capital account. Due to the complexity of this issue, the Class Ruling is not expected to be issued by the ATO before late June On 19 May 2009, the ATO issued on its website a general Taxpayer Alert (TA 2009/11) and Fact Sheet that discusses the taxation treatment of retail premiums paid on unexercised share entitlements. This alert does not mention Newcrest, and has not been provided to Newcrest. A copy of the ATO Fact sheet is attached for reference. As outlined in the Prospectus, retail shareholders should consult their own tax adviser as to the taxation implications of the retail entitlement offer.

2 Taxation Implications 7.1 Introduction The following is a summary of the Australian and New Zealand taxation implications for Eligible Retail Shareholders from participating (including by doing nothing) in the Retail Entitlement Offer. The Australian taxation implications for Eligible Retail Shareholders are outlined in Section 7.2, while the New Zealand taxation implications are outlined in Section 7.3. The summary reflects relevant Australian and New Zealand tax law as at the date of this Prospectus. It is intended as a general guide only and is not an authoritative or complete statement of all potential tax implications for each Eligible Retail Shareholder. Taxation is a complex area of law and the taxation consequences for each Eligible Retail Shareholder may differ depending upon their particular circumstances. Accordingly, each Eligible Retail Shareholder should consult their own tax adviser as to the taxation implications of the Retail Entitlement Offer. This Prospectus does not contain a discussion of the possible taxation implications of the Retail Entitlement Offer for Eligible Retail Shareholders who are tax residents of any country other than Australia or New Zealand under the laws of those other countries. 7.2 Australian taxation implications The summary below is relevant for Eligible Retail Shareholders who hold Shares on capital account. The summary does not apply to Eligible Retail Shareholders who hold Shares on revenue account (such as share traders, banks and insurance companies). Nor does the summary apply to trustees of employee share plans. The summary below takes into account legislation enacted as of the date of this Prospectus. On 26 June 2007, the Minister for Revenue and Assistant Treasurer announced that the Government will propose amendments to the income tax law so that rights issues are taxed on capital account. The announcement provides that the amendments (if legislated) are to apply from the income year. Importantly, this summary does not take into account the changes proposed in that announcement. Eligible Retail Shareholders should seek their own advice on the potential impact of any changes to the income tax law. Eligible Retail Shareholders that acquire New Shares may be required to include capital gains made upon subsequent disposal of those shares in their assessable income, under Australia s capital gains tax ( CGT ) rules. Capital gains are generally assessable in Australia. A capital gain arises when an asset is disposed of and the capital proceeds exceed the cost base of the asset. Conversely, a capital loss arises if the reduced cost base of the asset exceeds the capital proceeds received. Entitlements, and any New Shares acquired on taking up Entitlements, will be assets for Australian CGT purposes. A capital gain is generally included in the assessable income of the taxpayer, and the taxpayer may be subject to tax on the capital gain. The amount of tax payable will depend upon the particular taxpayer s income tax profile. For instance, an individual may have to pay tax at a rate up to 45% plus the Medicare levy on any capital gain. A company may have to pay tax of up to 30% on any capital gain Grant of Entitlements Following the decision of the High Court of Australia in Federal Commissioner of Taxation v McNeil, shareholders that have rights granted to them in respect their shareholding may potentially be required to include the value of the rights granted in their assessable income. The tax treatment of such rights in a taxpayer s hands broadly depends on the nature of the right granted, and also upon the action, or failure to take action, on the part of the taxpayer in realising the value of their rights. Under the Retail Entitlement Offer, Eligible Retail Shareholders may either: take up their Entitlements and acquire New Shares at the Offer Price; or through inaction, renounce their Entitlements by not taking up the Entitlements, potentially resulting in a receipt corresponding to a pro rata share of the Retail Premium (if any). Where an Eligible Retail Shareholder does not take up their Entitlement they may not otherwise dispose of their Entitlement to a third party (i.e. the Entitlement is not tradeable). Based on the principles in McNeil s case, and on non-binding discussions between Newcrest s tax advisers and representatives of the Australian Taxation Office, Newcrest has formed the view that it is reasonable to conclude that no tax liability should arise for Eligible Retail Shareholders upon the grant of the Entitlements to them under the Retail Entitlement Offer, regardless of whether the Entitlements are taken up or renounced. The potential tax liability for each Eligible Retail Shareholder subsequent to the grant of the Entitlements depends on whether the Eligible Retail Shareholder takes up the Entitlement, or does nothing and becomes entitled to a pro rata share of the Retail Premium (if any). This tax liability is discussed below. The potential taxation liability of Eligible Retail Shareholders in respect of the Entitlements will be the subject of a Class Ruling to be obtained from the Australian Taxation Office. This Class Ruling is anticipated to be finalised prior to 30 June Newcrest Mining Limited Prospectus

3 7.2.2 Taking up the Entitlements Eligible Retail Shareholders may take up all or part of their Entitlements by exercising their right to acquire New Shares at the Offer Price. No Australian tax liability should arise to an Eligible Retail Shareholder as a result of taking up any Entitlement under the Retail Entitlement Offer. New Shares will be acquired by the Eligible Retail Shareholder upon the take up of the Entitlement, and will be assets for Australian CGT purposes. The New Shares will be deemed to have been acquired at the time the Entitlement is taken up. The cost base for the New Shares should be equal to the sum of: the amount paid by the Eligible Retail Shareholder to acquire the New Shares (i.e., the Offer Price of $17.40 per New Share); and any non-deductible incidental costs incurred by the Eligible Retail Shareholder to acquire them Renouncing the Entitlements by not taking up the Entitlements An Eligible Retail Shareholder may renounce all or part of their Entitlement by not taking them up through inaction, but may not otherwise dispose of their Entitlement. In this circumstance, the Eligible Retail Shareholder will not acquire any New Shares under the Retail Entitlement Offer to that extent. New Shares referable to the Eligible Retail Shareholder s Entitlement not taken up may be sold under the Retail Bookbuild (see Section 1.5.2). If the New Shares referable to the Eligible Retail Shareholder s Entitlement are sold under the Retail Bookbuild, the Eligible Retail Shareholder will receive a pro rata share of the Retail Premium (if any). This receipt should be assessable as ordinary income in the hands of the Eligible Retail Shareholder at the time the proceeds are received. If the price at which the New Shares referable to the Eligible Retail Shareholder s Entitlement are sold under the Retail Bookbuild does not exceed the Offer Price, and no amount is received by the Eligible Retail Shareholder, no tax liability should arise. As noted above, these comments do not take into account the proposed changes to the taxation of rights with retrospective effect that were announced by the Minister for Revenue and Assistant Treasurer on 26 June Eligible Retail Shareholders should seek their own advice on the potential impact of any changes to the income tax law. Eligible Retail Shareholders that are foreign residents for Australian income tax purposes and are residents of a country with which Australia has a Convention for the Avoidance of Double Taxation (e.g. New Zealand, the United States and the United Kingdom) will only include their pro rata share of the Retail Premium (if any) in their Australian assessable income where they hold their Existing Shares in connection with a business they carry on in Australia through a permanent establishment. Eligible Retail Shareholders that are foreign residents for Australian income tax purposes and are not residents of a country with which Australia has a Convention for the Avoidance of Double Taxation (e.g. Hong Kong) will be required to include their pro rata share of the Retail Premium (if any) in their Australian assessable income when it is received Payment of dividends Residents of Australia Dividends paid to Australian tax resident Shareholders on New Shares should be included in each Shareholder s assessable income in the year in which they are paid, along with any franking credits attached to the dividends. A tax offset (or credit against tax payable) will generally be allowed for franking credits included in assessable income. Individuals, complying superannuation funds and certain trustees may be entitled to a refund of excess tax offsets to the extent that tax offsets for franking credits attached to dividends exceed the income tax that would have been payable but for obtaining the tax offsets. A Shareholder will be assessed on any franking credits and be entitled to a tax offset provided the Shareholder satisfies the 45-day holding period rule. Broadly, this rule requires Shareholders to hold the New Shares, without materially diminished risks of loss or opportunities for gain, for at least 45 clear days. Foreign residents Dividends paid to foreign resident shareholders (who are not also Australian residents for tax purposes) may be subject to Australian dividend withholding tax, at a rate of between 5% and 30%, on the portion of the dividend that is not franked and not declared by Newcrest to be paid from conduit foreign income. No dividend withholding tax will be payable on the dividends to the extent that they are franked or declared by Newcrest to be paid from conduit foreign income. Neither franked nor unfranked dividends received by non-resident exempt investors (e.g. foreign governments) in respect of New Shares will be taxable in Australia, nor will they be subject to dividend withholding tax. Newcrest Mining Limited Prospectus 59

4 Taxation Implications Disposal of New Shares Residents of Australia Shareholders that are Australian residents for tax purposes and who hold their New Shares on capital account will, prima facie, make a capital gain on the sale of their New Shares if the capital proceeds received for the disposal of the New Shares exceed the cost base for the New Shares. The sale may give rise to a capital loss if the capital proceeds received for the disposal of the New Shares is less than the reduced cost base for the New Shares. A capital loss will be available to reduce capital gains (not ordinary income) arising in the year of sale or in subsequent years. Shareholders will, for CGT purposes, be treated as acquiring their New Shares as a result of taking up Entitlements on the day on which the Entitlements are taken up. Newcrest shareholders that are individuals or trusts (other than a trust that is a complying superannuation fund) may reduce their capital gain by 50%, after offsetting current year or prior year capital losses, if they hold their New Shares for at least 12 months before disposal. Shareholders that are complying superannuation funds may reduce their capital gain by 33 1 /3%, after offsetting current year or prior year capital losses, if they hold their New Shares for at least 12 months before disposal. Foreign residents Shareholders that are foreign residents (and not also Australian resident for tax purposes) and who hold their New Shares on capital account will only make a taxable capital gain on the disposal of their New Shares where: the Shareholder and its associates (if any) beneficially own, or owned throughout a 12 month period that began no earlier than 24 months before the date of sale, 10% or more of the issued share capital of Newcrest; or the Shareholder holds the New Shares in connection with a business carried on in Australia through a permanent establishment Goods and services tax ( GST ) No Australian GST will be payable on the grant of the Entitlements or the acquisition or disposal of New Shares. In respect of all other matters and transactions arising under this Prospectus (such as costs related to the grant of the Entitlements or the acquisition or disposal of New Shares), the Australian GST implications may vary depending upon your Australian GST registration status and residency status. You should seek independent advice in relation to your individual Australian GST position Stamp duty No Australian stamp duty will arise on the grant of the Entitlements or the acquisition or disposal of New Shares. In addition, no Australian stamp duty should be payable on the disposal of the New Shares, providing that the New Shares are quoted on ASX at the time of disposal. 7.3 New Zealand taxation implications New Zealand does not have a capital gains tax but does tax profits and gains where the property disposed of is held on revenue account. Accordingly, a New Zealand tax liability would arise for any gains arising from the sale of New Shares that were acquired with the purpose of sale or as part of a business of dealing in shares. The tax implications outlined below address the tax position of Eligible Retail Shareholders who are capital account holders of both the Entitlements and the New Shares. Newcrest has not commented on the taxation position of Eligible Retail Shareholders who may hold their Shares or Entitlements on revenue account. Those Shareholders should seek independent tax advice on their specific circumstances Grant of Entitlements The grant of the Entitlements to Eligible Retail Shareholders should not constitute a dividend for New Zealand income tax purposes and should not result in any New Zealand income tax liability for Eligible Retail Shareholders. As noted in Section 7.2.1, the tax treatment depends on the nature of the right granted, and also upon the action, or failure to take action, on the part of the taxpayer in realising the value of their rights. The grant can be expected to be characterised as flowing from the capital rights of the Shares and the grant should therefore be on capital account and not taxable. However, following the decision of the High Court of Australia in Federal Commissioner of Taxation v McNeil, as discussed in Section 7.2.1, there is a risk that the receipt of the Entitlements will be taxable income in New Zealand under ordinary principles. Although decisions of the Australian High Court are not binding, they can be influential on their New Zealand counterparts. As a result, Eligible Retail Shareholders should be aware of this risk. To date there have been no announcements by the New Zealand government or the New Zealand Inland Revenue Department that would confirm the McNeil approach as applicable in New Zealand. 60 Newcrest Mining Limited Prospectus

5 7.3.2 Taking up the Entitlements An Eligible Retail Shareholder may take up their Entitlement by exercising their right to acquire the New Shares at the Offer Price. No New Zealand tax liability should arise for the Eligible Retail Shareholder as a result of taking up any Entitlement under the Retail Entitlement Offer Renouncing the Entitlements by not taking up the Entitlements An Eligible Retail Shareholder may renounce all or part of their Entitlement by not taking them up through inaction, but may not otherwise dispose of their Entitlement. In this circumstance, the Eligible Retail Shareholder will not acquire any New Shares under the Retail Entitlement Offer to that extent. New Shares referable to the Eligible Retail Shareholder s Entitlement not taken up may be sold under the Retail Bookbuild (see Section 1.5.2). If the New Shares referable to the Eligible Retail Shareholder s Entitlement are sold under the Retail Bookbuild, the Eligible Retail Shareholder will receive a pro rata share of the Retail Premium (if any). As the Entitlement flows from a capital account holding, the receipt should also be on capital account and not taxable Application of the Foreign Investment Fund rules Shares held in Australian resident companies listed on ASX which are included in the All Ordinaries index and which maintain a franking account are not attributing interests in a Foreign Investment Fund for New Zealand tax purposes Payment of dividends Dividends payable to New Zealand resident individuals will be taxable in their hands, with any withholding tax deducted being available as a credit against this tax liability. However, no credit will be allowed for any Australian franking credits attached. Dividends payable to New Zealand resident companies will incur a Foreign Dividend Withholding Payment liability at the prevailing company tax rate. The rate is currently 33%, although this is scheduled to fall to 30% in the 2009 income tax year. Any withholding tax deducted will be available as a credit against this liability. In addition, if the New Zealand resident company has a sufficient interest in Newcrest, a credit for underlying Australian tax may be available Disposal of New Shares Any gain on the disposal of the New Shares obtained after taking up the Entitlements should not be taxable to Eligible Retail Shareholders where they have been acquired and held on capital account Goods and services tax No New Zealand goods and services tax will be payable on the grant of the Entitlements or the acquisition or disposal of New Shares. Any sale of the New Shares to a non-resident may be capable of being zero-rated as an exported service. Eligible Retail Shareholders should seek separate professional advice on this point as appropriate. Newcrest Mining Limited Prospectus 61