• Section 3 - When is a CFC deemed to pay a dividend?

    Attention

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    It is possible that a resident taxpayer with an interest in an unlisted country CFC may try to minimise Australian tax by arranging for the CFC to distribute benefits in a form other than dividends to its shareholders or their associates.

    There are rules to prevent this form of tax avoidance in section 47A. These rules deem certain transfers and payments made by an unlisted country CFC to be dividends. These dividends are then taxed in the normal way.

    For section 47A to apply, a CFC must provide a benefit to:

    • a resident who is a shareholder or an associate of a shareholder of the CFC, or
    • another CFC or CFT, directly or through other entities, where the first entity that received the dividend is a shareholder or an associate of a shareholder of the CFC.
    Last modified: 05 Dec 2006QC 17522