A recent ruling by the High Court of Australia has cast considerable uncertainty regarding the tax treatment of renounceable rights which are issued by a company to its shareholders. The High Court of Australia in Commissioner of Taxation v. McNiel held that sell-back rights which are issued by a company to its shareholder amounted to income and was taxable in the hands of the shareholder. The quantum of income derived by the shareholder as a result of the issue was represented by the market value of those rights at the time the rights were issued. In the McNeil decision the High Court disturbed the long held belief that a rights issue would not be treated as taxable income or a capital gain at the time of issue. The High Court's decision should be contrasted with the decision by the ECJ in Kretztechnik AG which held that an issue of new securities to shareholders did not involve taxation consequences.