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On 31 March 2011, the ATO released draft Practice Statement PS LA 2843 entitled "Exercise of the Commissioner’s discretion under s 109RB of Division 7A of Part III of ITAA1936 to either disregard a deemed dividend or to permit a deemed dividend to be franked".

Section 109RB potentially provides relief to taxpayers who inadvertently trigger a deemed dividend as a result of an honest mistake or inadvertent omission. It confers on the Commissioner, in certain circumstances, a discretion to decide in writing to disregard a deemed dividend that arises under Division 7A of Part III of ITAA 1936 or allow the dividend to be franked.

The purpose of the draft Practice Statement is to provide guidance to tax officers on:
(a) when the condition under s 109RB(1)(b) has been satisfied
(b) matters that the Commissioner must have regard to in making a decision under s 109RB(2) (or refusing to make such a decision).

This practice statement must be read in conjunction with TR 2010/8. Taxation Ruling TR 2010/8 outlines what constitutes an honest mistake or an inadvertent omission.

Comments on the draft are due by 21 April 2011.


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