Taxation Laws Amendment (Company Law Review) Act 1998 (63 of 1998)

Schedule 4   Bonus shares

Income Tax Assessment Act 1936

3   Subsections 6BA(4) to (9)

Repeal the subsections, substitute:

(4) A company issues shares for no consideration if:

(a) it credits its capital account with profits in connection with the issue of the shares; or

(b) it credits its capital account with the amount of any dividend to a shareholder and the shareholder does not have a choice whether to be paid the dividend or to be issued with the shares.

This subsection does not limit the generality of subsection (1).

Note: A company that makes a credit covered by paragraph (a) or (b) will have a tainted share capital account.

(5) Subject to subsection (6), if a shareholder has a choice whether to be paid a dividend or to be issued shares and the shareholder chooses to be issued with shares:

(a) the dividend is taken to be credited to the shareholder; and

(b) the dividend is taken to have been paid out of profits; and

(c) subsection (2) applies in working out the consideration for the acquisition of the shares for the purposes of this Act.

However, the share capital account of the company does not become a tainted share capital account as a result of the crediting of the dividend to the share capital account.

(6) Subsection (5) does not apply if:

(a) a shareholder in a listed public company (within the meaning of the Income Tax Assessment Act 1997) has a choice whether to be paid a dividend (other than a minimally franked dividend within the meaning of subsection 45(3)) or to be issued shares and the shareholder chooses to be issued with shares; and

(b) the company does not credit the share capital account in connection with the issue of those shares.

Note: If subsection (5) does not apply because of this subsection, subsection (3) will apply.