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Edited version of private advice
Authorisation Number: 1051799143557
Date of advice: 17 February 2021
Ruling
Subject: Section 177EA of the ITAA 1936
Question
Will the Commissioner make a determination under paragraph 177EA(5)(a) of the ITAA 1936 that a franking debit arises in Company A's franking account in respect of the dividend paid in 20XX ("Dividend")?
Answer
No
This ruling applies for the following period:
1 January 20XX to 31 December 20XX
The scheme commences on:
In income year commencing on 1 January 20XX
Relevant facts and circumstances
Shares in company A will be disposed of under a scheme of arrangement.
Company will pay fully franked dividend to its shareholders prior to the scheme record day.
Relevant legislative provisions
Reasons for decision
The purpose of section 177EA of the ITAA 1936 is to protect the imputation system from abuse and ensure that the benefits of the imputation system flow to the economic owner of the share which is the source of the franked distribution.
The shares held by the members of Company A would clearly constitute a membership interest. The disposition of these shares by the shareholders would constitute a scheme for the disposition of membership interests for the purposes of section 177EA of the ITAA 1936.
Having considered the relevant circumstances associated with the scheme involving the disposition of shares by its shareholders, the requisite purpose is not present.
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