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  • Deemed dividends



    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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    Where a payment is made by a company or trust under the retirement exemption to a CGT concession stakeholder who is an employee of that entity, the payment is deemed (for the purposes of section 109 of the Income Tax Assessment Act 1936) to have been made in consequence of the termination of employment of the stakeholder.

    If the payment from a private company to the employee CGT concession stakeholder is excessive (after considering all the circumstances), section 109 of the Income Tax Assessment Act 1936 deems the excessive remuneration to be a dividend.

    Consideration of what is unreasonable or excessive is not restricted to the retirement exemption limit of $500,000. Any opinion formed should also have regard to the length of service and level of contribution to the business by the CGT concession stakeholder/employee.

    There are no such implications for payments made to CGT concession stakeholders who are not employees of the company or trust.

    Last modified: 30 Jun 2009QC 27964