| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012368250075
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Franking credit tax offset
Question 1
Is the taxpayer entitled to a tax offset of the $X franking credits under subsection 207-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the $Y off-market share buy-back dividend that was made to them by the private company in 2012?
Answer
Yes. Please see our 'Reasons for decision'.
This ruling applies for the following period:
1 July 2011 to 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
The taxpayer is an Australian resident individual.
Prior to the off-market share buy-back, the taxpayer held A ordinary shares in the private company.
In 2012, the private company undertook an off-market share buy-back where it bought back, and subsequently cancelled, the taxpayer's A ordinary shares for $Z.
Of the $Z off-market share buy-back purchase price, $Y was a fully franked dividend with $X franking credits.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 207-20(1),
Income Tax Assessment Act 1997 Subsection 207-20(2),
Income Tax Assessment Act 1997 Section 207-70 and
Income Tax Assessment Act 1997 Subsection 207-75(1).
Reasons for decision
Summary
The taxpayer is entitled to a tax offset of the $X franking credits under subsection 207-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the $Y off-market share buy-back dividend that was made to them by the private company in 2012.
Detailed reasoning
Section 207-70 of the ITAA 1997 provides that unless the taxpayer satisfies the residency requirement:
· no amount of the $X franking credits can be included in their assessable income for the income year ended 30 June 2012 under subsection 207-20(1) of the ITAA 1997, and
· they are not entitled to a tax offset of the $X franking credits under subsection 207-20(2) of the ITAA 1997.
The taxpayer will satisfy the residency requirement under subsection 207-75(1) of the ITAA 1997 as they were a resident in 2012 at the date on which the off-market share buy-back dividend was made.
In conclusion, the taxpayer is entitled to a tax offset of the $X franking credits under subsection 207-20(2) of the ITAA 1997 in respect of the off-market share buy-back dividend that was made to them by the private company in 2012.