ATO Interpretative Decision
ATO ID 2003/593 (Withdrawn)
Income Tax
Assessability of final dividend received from the liquidator of WoolStock Australia LtdFOI status: may be released
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This ATO ID is withdrawn as the fact situation is no longer current and the decision is not interpretative.This document has changed over time. View its history.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a final dividend paid by the liquidator of WoolStock Australia Ltd (WoolStock) to a taxpayer, a primary producer who held ordinary shares in WoolStock, assessable as statutory income under section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. A final dividend paid by the liquidator of WoolStock to the taxpayer, a primary producer who held ordinary shares in Woolstock, is assessable as statutory income under section 6-10 of the ITAA 1997.
Facts
The taxpayer is a primary producer who in 1997 was granted units in Wool International in respect of their contribution to Australia's wool stockpile.
Each unit represented one whole dollar of wool tax the taxpayer paid between 1 July 1993 and 30 June 1996.
On 1 July 1999 (conversion time), Wool International was privatised and registered as WoolStock Australia Ltd.
At conversion time the taxpayer was granted one ordinary share in WoolStock for every unit they held in Wool International.
The value of each share's 'paid-up share capital' was $0.01.
WoolStock went into liquidation on 24 April 2002.
On 1 October 2002, the liquidator paid a cash dividend of $0.0309 per share to be distributed to all WoolStock shareholders.
The dividend was paid as a final dividend, after which the company was deregistered and the shares cancelled.
Reasons for Decision
The assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year (section 6-5 of the ITAA 1997).
The assessable income of a resident taxpayer also includes statutory income amounts that are not ordinary income but are included in assessable income by another provision of tax law. This includes statutory income from all sources, whether in or out of Australia (section 6-10 of the ITAA 1997).
If an amount is included in assessable income under both the ordinary and statutory income rules, the terms of the provision that includes it as statutory income prevail unless it is stated otherwise (section 6-25 of the ITAA 1997).
Where distributions are made to a shareholder of a company that has gone into liquidation and those amounts represent income derived by the company, providing the amounts are not a replacement of paid-up share capital the distribution is deemed to be a dividend (section 47 of the Income Tax Assessment Act 1936 (ITAA 1936)).
In turn, such a deemed dividend is included in the assessable income of a resident shareholder (section 44 of the ITAA 1936).
'Paid-up share capital' is the amount standing to the credit of the company's share capital account reduced by an amount that represents amounts unpaid on shares (subsection 6(1) of the ITAA 1936). In relation to deemed dividends paid by a company in liquidation, 'paid-up share capital' includes the cancelled share capital of the company that has not been repaid to shareholders (subsection 47(3) of the ITAA 1936).
The paid-up share capital of WoolStock shares was $0.01 per share and had not been repaid to shareholders. Accordingly, $0.01 of each $0.0309 final dividend represents cancelled share capital that has not previously been repaid to shareholders and is therefore not a deemed dividend under section 47 of the ITAA 1936.
The remaining $0.0209 per share held is a deemed dividend assessable under section 44 of the ITAA 1936. This statutory income amount is included in the taxpayer's assessable income under section 6-10 of the ITAA 1997.
Note 1: Taxation Determination TD 2001/27 deals with the CGT implications of distributions by a liquidator.
Note 2: ATO ID 2003/594 deals with averaging of primary production income in this taxpayer's circumstances.
Date of decision: 16 May 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
section 6-5
section 6-10
section 6-25
subsection 6(1)
section 44
section 47
subsection 47(3)
Related Public Rulings (including Determinations)
Taxation Determination TD 2001/27
ATO ID 2003/594
Keywords
Deemed dividends
Distributions
Dividend income
Liquidation
Primary production
ISSN: 1445-2782
| Date: | Version: | |
| 16 May 2003 | Original statement | |
| You are here | 9 April 2010 | Archived |