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Edited version of private advice
Authorisation Number: 1051662722426
Date of advice: 21 April 2020
Ruling
Subject: Proposed return of capital and proposed special dividend
Question 1
Will the proposed Return of Capital constitute a dividend as defined in subsection 6(1) of the
Income Tax Assessment Act 1936 (ITAA 1936) and the exclusion under section 6(4) of theITAA
1936?
Answer
No.
Question 2
Will the Commissioner make a determination under subsection 45A(2) of the ITAA 1936 that
section 45C of the ITAA 1936 applies in relation to the whole, or a part, of the proposed Return of
Capital?
Answer
No.
Question 3
Will the Commissioner make a determination under subsection 45B(3) of the ITAA 1936 and subsection 45C(3) of the ITAA 1936 in relation to the whole, or a part, of the proposed Return of Capital?
Answer
No.
Question 4
Will the proposed Special Dividend constitute a 'dividend' as defined in subsection 6(1) of the ITAA 1936?
Answer
Yes.
Question 5
Will the proposed Special Dividend constitute a frankable distribution under section 202-40 of the
Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Question 6
Will the Commissioner make a determination under subsection 177EA(5) of the ITAA 1936 to deny the whole, or a part, of the imputation benefit received in relation to the proposed Special Dividend or that a franking debit or exempting debit arises for Company A in respect of proposed Special Dividend?
Answer
No
Question 7
Will the Commissioner make a determination under subsection 204-30(3) of the ITAA 1997 to deny
the whole, or a part, of the imputation benefit received in relation to the proposed Special Dividend
or that a franking debit or exempting debit arises for Company A in respect of the proposed Special
Dividend?
Answer
No
This ruling applies for the following period:
1/7/20XX to 30/6/20XX
The scheme commences on:
XX/XX/20XX
Relevant facts and circumstances
Company A is owned by Australian shareholders and non-resident shareholders.
Due to certain business events, Company A intends a Return of Capital and Special Dividend to its shareholders. The Return of Capital will be debited to Company's A untainted share capital account.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1936 Section 45A
Income Tax Assessment Act 1936 Section 45B
Income Tax Assessment Act 1936 Section 45C
Income Tax Assessment Act 1936 Subsection 177EA(5)
Income Tax Assessment Act 1997 Section 202-40
Income Tax Assessment Act 1997 Subsection 204-30(3)
Reasons for decision
Question 1
The proposed Return of Capital does not meet the definition of 'dividend' as defined in subsection 6(1) of the ITAA 1936
Question 2
As section 45A will not apply in this case, the Commissioner will not make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies to the proposed Return of Capital, deeming the capital benefits to be a dividend and hence assessable for income tax purposes.
Question 3
As section 45B will not apply in this case, the Commissioner will not make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies to the proposed Return of Capital to deeming the amount of capital benefit to be an unfranked dividend.
Question 4
The proposed Special Dividend will constitute a dividend as defined in subsection 6(1) of the ITAA 1936.
Question 5
The proposed Special Dividend will constitute a frankable distribution under section 202-40 of the ITAA 1997.
Question 6
The Commissioner will not make a determination under paragraph 177EA(5)(b) of the ITAA 1936 to deny the whole, or a part, of the imputation benefit received in relation to the proposed Special Dividend or that a franking debit or exempting debit arises for Company A in respect of the proposed Special Dividend.
Question 7
The Commissioner will not make a determination under subsection 204-30(3) of the ITAA 1936 to deny the whole, or a part, of the imputation benefit received in relation to the proposed Special Dividend or that a franking debit or exempting debit arises for Company A in respect of proposed Special Dividend or that a franking debit or exempting debit arises for Company A in respect of the proposed Special Dividend.
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