The ATO states in para 12 of the Practice Statement that:
"...prima facie, the Average Capital Per Share [ACPS] methodology is the preferred methodology for determining the 'Dividend/Capital Split' in an off-market share buy-back. In the absence of exceptional circumstances, Average Capital Per Share will be applied to determine the capital component."
The ACPS is obtained by dividing a company's ordinary issued capital by the number of shares on issue.
In a media release issued on 2 May 2007, the Commissioner, Michael D’Ascenzo, said the statement outlines the existing processes that staff must follow when considering the consequences of on-market and off-market share buy-backs.
“The practice statement does not represent a change in practice by the ATO. With recent interest in share buy-backs, this practice statement will assist stakeholders to better understand our administrative practices," Mr D’Ascenzo said.
The Commissioner said that the practice statement will also assist with the Board of Taxation’s review of off-market share buy-backs as announced by the Treasurer in October 2006. One of the Board's terms of reference is the administrative practices of the ATO relating to share buy-backs. However, the practice statement should not be seen as predetermining any recommendations arising from the Board’s review.
For a copy of PS LA 2007/9, go here
For a copy of the ATO's media release, No Nat 2007/13, go here