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Edited version of private advice
Authorisation Number: 1052291387405
Date of advice: 19 August 2024
Ruling
Subject: Section 207-159 - distributions funded by capital raising
Question
In applying paragraph 202-5(b) and section 202-40 of the Income Tax Assessment Act 1997 (ITAA 1997), will the proposed dividend be an unfrankable distribution under paragraph 202-45(ea) of the ITAA 1997 because it is a distribution to which subsection 207-159(1) of the ITAA 1997 applies?
Answer
No.
This ruling applies for the following period:
1 July 2024 to 30 June 2025
The scheme commenced:
In the income year ending 30 June 2025
Relevant facts and circumstances
A company incorporated in Australia has a publicly announced dividend policy.
The company has regularly paid fully franked dividends in respect of its ordinary shares.
During the last income year, the taxpayer made an unusually large profit which is unlikely to be repeated in future income years.
As a result, the company is proposing to pay a larger dividend in respect of each ordinary share. The larger dividend is consistent with the company's publicly announced dividend policy.
The company has no intention to issue an 'equity interest' (within the meaning given by Subdivision 974-C of the ITAA 1997) in the future.
Reasons
The proposed dividend will not be unfrankable pursuant to paragraph 202-45(ea) of the ITAA 1997 because the conditions of subsection 207-159(1) of the ITAA 1997 are not satisfied.