• Subdivision 768-A: scoping brief for proposed ATO guidance

    The purpose of the Subdivision 768-A Consultation is to discuss interpretation issues arising out of the new Subdivision 768-A ITAA 1997.

    At the initial meeting of the consultation group on 24 February 2015 industry representatives and tax practitioners raised a number of issues that required clarification from the ATO. These issues are listed in the attachment to the agenda of the meeting (‘Attachment’). While most of these issues are matters of statutory interpretation, some of the matters are administrative.

    We provide the following scoping brief in relation to the clarifications of these issues. The scoping brief contains the ATO’s preliminary thoughts only.

    Issues

    The Commissioner will provide his views on the following matters:

    What is the meaning of ‘at the time the distribution is made’

    It is proposed that guidance on this issue will be provided in a Taxation Ruling.

    The Taxation Ruling would cover the following issues:

    1. What is the meaning of ‘at the time the distribution is made’ in paragraph 768-5(1)(b) and 768-5(2)(d) of the ITAA 1997?
    2. What impact does the meaning of ‘at the time the distribution is made’ have on the availability of the exemption in Subdivision 768-A for the following transactions:
      1. Off market share-buy backs
      2. On market share-buy backs
      3. Liquidations
      4. Share cancellations and redemptions generally.
       
    3. What impact does the meaning of ‘at the time the distribution is made’ in paragraph 768-5(2)(d) have where the distribution is received indirectly though one or more imposed trusts or partnerships?

    This guidance would cover interpretive issue 1 and issue 3a of the Attachment.

    What is the meaning of ‘the amount can be attributed …to a foreign equity distribution’

    It is proposed that guidance on this issue will be provided in a Taxation Determination and perhaps a Practice Statement.

    The Taxation Determination would cover the following issue:

    1. What is the meaning of ‘the amount can be attributed … to a foreign equity distribution’ in paragraph 768-5(2)?

    The Practice Statement would provide practical guidance on how attribution can be determined for the purposes of paragraph 768-5(2).

    This guidance would cover issue 3b of the Attachment.

    What is the meaning of ‘holds’

    It is proposed that guidance on this issue will be provided in a Taxation Ruling (or possibly a Practice Statement).

    The Taxation Ruling would cover the following issues:

    1. What is the meaning of ‘holds’ in sections 960-185 and 960-190 ITAA 1997 and sections 350 and 351 ITAA 1936 for the purpose of Subdivision 768-A?
    2. What impact does the meaning of ‘holds’ have on the availability of the exemption in Subdivision 768-A for the following entities:
      1. Beneficiaries of a trust
      2. Partners in a partnership
      3. Nominees
       

    Administrative guidance may be needed if it is not possible to arrive at a statutory interpretation of ‘holds’ that accords with the policy intent of Subdivision 768-A.

    This guidance would cover issues 4 and 5 of the Attachment.

    Interaction between Subdivision 768-A, Subdivisions 815-B and C and Division 974 ITAA 1997 for legal form debt instruments that are characterised as an equity interest

    Vivian Chang and Cameron Blackwood agreed at the consultation meeting to seek feedback from their members and provide us with a rephrased version of this question.

    The ATO will consider what guidance is appropriate once we have worked with the consultation group to clarify the issue.

    This guidance would cover issue 2 of the Attachment.

      Last modified: 05 Aug 2015QC 46593