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This Taxpayer Alert was issued on 19 May 2009. It describes arrangements whereby a company pays shareholders with unexercised share entitlements an amount (referred to in this Alert as a "Retail Premium") in respect of those unexercised entitlements. The Taxpayer Alert is designed to help shareholders make informed decisions whether to take up entitlements to a share offer based on the tax treatment of retail premium payments.

The Tax Office is concerned that shareholders are choosing whether or not to exercise entitlements to shares on the basis of incorrect advice provided by the company issuing the shares indicating that any retail premiums should be treated as capital for tax purposes.

The ATO advises that it will be reviewing tax returns of shareholders who receive these payments. People who find they have incorrectly declared these payments who approach the ATO before the ATO contacts them for an audit will be entitled to a reduction in any penalties that might apply.

The ATO has also issued a fact sheet entitled "Retail Premiums paid to shareholders where share entitlements not taken up or not available", which outlines the ATO's views about the tax consequences of retail premiums paid to shareholders where share entitlements were not taken up by or not available to them.

For a copy of TA 2009/11 go here.

For a copy of the ATO's media release go here.

For a copy of the ATO's fact sheet go here.

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