ATO Interpretative Decision
ATO ID 2002/639 (Withdrawn)
Income Tax
Shares received as a result of a company split - treated as a dividendFOI status: may be released
-
This ATO ID has been withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.
This ATO ID has been amended to clarify that the ID does not apply arrangements which are demergers.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the value of shares received in Company B as a result of the individual taxpayer's shareholding in Company A included, as a dividend, in the taxpayer's assessable income under section 44 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. The value of shares received in Company B as a result of the individual taxpayer's shareholding in Company A is included, as a dividend in the taxpayer's assessable income under section 44 of the ITAA 1936.
Facts
The individual taxpayer held shares in Company A.
The taxpayer is a resident of Australia for taxation purposes.
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.
The arrangement is not a demerger for the purposes of Division 125 of the ITAA 1997.
As 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
Subsection 44(1) of the ITAA 1936 includes in the assessable income of a shareholder who is a resident of Australia dividends paid to a shareholder by a company out of profits derived by it from any source.
Subsection 6(1) of ITAA 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' and is therefore included in the taxpayer's assessable income under subsection 44(1) of the ITAA 1936.
Year of income: Year ended 30 June 2000
Legislative References:
Income Tax Assessment Act 1936
subsection 6(1)
section 44
subsection 44(1)
ATO ID 2002/541
Keywords
Acquisition of shares
Shares
Bonus shares
Dividend Income
ISSN: 1445-2782
| Date: | Version: | |
| 5 March 2002 | Original statement | |
| You are here | 8 October 2010 | Archived |