12 May 099 Off market share buy backsThe Government will implement the recommendations of the Board of Taxation to improve the taxation treatment of off market share buy backs, with effect from the date of Royal Assent of the amending legislation.
Off market share buy backs are a mechanism for companies to return surplus capital to shareholders, and therefore facilitate the optimal allocation of capital across the economy. To implement the Board’s recommendations, the Government will introduce legislation to:
- establish a self executing specific provision to debit the franking account of a company that undertakes an off market share buy back to cancel the tax benefit of streaming imputation credits from non resident to resident shareholders;
- deny notional losses to shareholders that participate in off market share buy backs conducted by listed companies;
- modify the income tax law to specify the basis for determining the capital/dividend split, extend the period of lodgement for a distribution statement for a company conducting an off market share buy back, and confirm that certain integrity rules do not apply to tender style off market share buy backs; and
- transfer the share buy back provisions from the Income Tax Assessment Act 1936 to the Income Tax Assessment Act 1997.
The Government also endorses the Board recommendation that the ATO remove the ‘14% administrative cap’ on the level of discount for off market share buy backs undertaken by listed companies.
For more information, see the Assistant Treasurer's media release, No 2009/48, 12 May 2009,
For a copy of the Board's report, go here