ATO Interpretative Decision
ATO ID 2002/541 (Withdrawn)
income tax
Capital gains tax: CGT event G1: payment a dividendFOI status: may be released
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This ATO ID is withdrawn from the database as it is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Did CGT event G1 in section 104-135 of the Income Tax Assessment Act 1997 (ITAA 1997) happen in respect of a shareholding in Company A when the taxpayer received shares in Company B?
Decision
No. CGT event G1 did not happen on the payment by Company A of shares in Company B because the requirement in paragraph 104-135(1)(b) of the ITAA 1997 that the payment not be a dividend was not satisfied.
Facts
The taxpayer held shares in Company A.
Some time after the taxpayer acquired these shares, Company A split into Company A and Company B. Each share owned in Company A as at the relevant date entitled the holder to receive shares in Company B.
As a result of the split, the taxpayer received shares in Company B.
The distribution of the Company B shares was debited against Company A's retained profits.
Reasons for Decision
CGT event G1 happens if a company makes a payment to a shareholder in respect of a share owned in the company and some or all of the payment is not a dividend (subsection 104-135(1) of the ITAA 1997).
Subsection 6(1) of the Income Tax Assessment Act 1936 defines 'dividend' as including any distribution made by a company to any of its shareholders, whether in money or other property, but excludes such a distribution if it is debited against the share capital account of the company.
As the distribution of the Company B shares was debited against Company A's retained earnings, it falls within the definition of 'dividend'.
As the shares in Company B are considered to be a dividend the condition in paragraph 104-135(1)(b) of the ITAA 1997 is not satisfied and CGT event G1 does not happen.
Date of decision: 5 March 2002Year of income: Year ended 30 June 2000
Legislative References:
Income Tax Assessment Act 1936
subsection 6(1)
section 104-135
subsection 104-135(1)
paragraph 104-135(1)(b)
Keywords
Acquisition of shares
Shares
Bonus shares
Dividend
ISSN: 1445-2782
| Date: | Version: | |
| 5 March 2002 | Original statement | |
| You are here | 26 February 2010 | Archived |