Changes to the tax treatment of off-market share buy-backs offered by listed public companies as announced in the 2023 October Budget are now law. These changes align the tax treatment of off-market share buy-backs offered by listed public companies with on-market share buy-backs.
An off-market share buy-back happens when a company offers to buy its shares back from shareholders directly, rather than buying them through a stock exchange in the open market. Usually, the company writes to shareholders with the offer.
If a listed public company offers an off-market share buy-back after 7:30 pm AEDT on 25 October 2022, the tax treatment for its shareholders will be the same as a shareholder selling their shares on-market.
This means the entire buy-back price will be treated as capital proceeds rather than part of the buy-back price being treated as a dividend. Additionally, the changes will affect distributions received for selective share cancellations offered by a listed public company, which will now be treated as unfrankable distributions.
This change doesn't affect the tax treatment of off-market share buy-backs offered by companies that aren't listed public companies.
Shareholders who have previously sold their shares as part of an off-market buy-back should continue to refer to the dividend or distribution statement, or class ruling if applicable.
For more information, visit Share buy-backs.