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Draft Taxation Determination

TD 93/D225 (Withdrawn)

Income tax: are distributions made in the course of an informal winding up of a company assessable when the company is not dissolved within a reasonable time ?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been Withdrawn.

FOI status:

draft only - for comment

Preamble

Draft Taxation Determinations (TDs) present the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

1. Yes. Subsection 47(2B) provides that if a company is not dissolved within 3 years after the informal distribution or within such further period as the Commissioner allows, the distribution is deemed to be a dividend paid by the company out of profits derived by it. The deemed dividend is assessable in the year that the distribution was made.

2. The amount which is deemed to be a dividend under subsection 47(2B) will be the total shareholders' funds less any amount of paid up capital.

Example

On 1 June 1993, Company A distributes the net assets of the company to its two shareholders B and C who both own 1 share each. The capital account of Company A is as follows : -
Reserves 100,000
Paid up capital 2
100,002
If no action is taken to dissolve Company A within 3 years of the informal distribution (ie 1/6/96) then shareholders B and C will be assessable on their share of the shareholders' funds less any amount of paid up capital. The amount deemed to be a dividend is $100,000. (ie 100,002 - 2(paid up capital)). Therefore shareholders B and C will be each assessable on a deemed dividend of $50,000 in the 1992/3 income year.

Commissioner of Taxation
2/9/93

References


BO HOB/TD11

ISSN 1038 - 8982

Subject References:
Companies
Deemed Dividends
Distribution

Legislative References:
ITAA s47(2A)
ITAA s47(2B)


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