• TA 2015/1: dividend stripping & transferring shares to SMSFs video transcript

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    Hi, I'm Bruce Collins from the Australian Taxation Office. I'm here to talk to you about dividend stripping involving the transfer of private company shares to a SMSF – Taxpayer Alert TA 2015/1.

    The target audience for these arrangements include SMSF members (typically near retirement) who own shares in a private company with substantial accumulated profits already taxed at company rates.

    Under this arrangement, a SMSF member, who is a shareholder of a private company, transfers their shares in the private company to the SMSF. The private company then channels franked dividends to the SMSF, instead of to the original shareholder. The SMSF then claims concessional rates of tax on this income and receives a partial or total refund of franking credits.

    The tax mischief we are concerned about is whether the intention of the arrangement may be to strip profits from the private company, with the shareholder or an associate avoiding ‘top-up’ income tax on the dividend income.

    The SMSF also receives a partial or total refund of the unused franking credits which is available for tax-free distribution to its members.

    The arrangement may also have capital gains tax and other superannuation and tax implications especially where the shares in the private company are transferred below market value.

    We've issued Taxpayer Alert TA 2015/1 to notify the public of our concerns about the arrangement and will issue a public guidance product to explain the ATO view.

    We may undertake compliance activity to apply superannuation and taxation provisions, including anti-avoidance rules to such arrangements, on a case-by-case basis.

    We encourage affected taxpayers to seek independent advice or to apply for a private ruling. Taxpayers should also consider whether to self-amend relevant tax assessments or make a voluntary disclosure to the ATO.

    For more information or to view the Alert, visit the ATO website and search for Taxpayer Alert TA 2015/1.

    Thank you for your time.

      Last modified: 01 Jul 2015QC 46147