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14 Nov 13 Matrimonial property proceedings: payments etc by private company - TR 2013/D6

On 13 November 2013, the ATO released for public comment by 8 January 2014 draft Taxation Ruling TR 2013/D6 entitled "Income tax: matrimonial property proceedings and payments of money or transfers of property by a private company to a shareholder (or their associate)".

The draft Ruling states that where an order is made under s 79 of the Family Law Act 1975 and that order requires a private company, or a party to the matrimonial proceedings to cause the private company, to pay money or transfer property to a party to the matrimonial proceedings who is a shareholder of the private company, the payment of money or transfer of property in satisfaction of that order is an ordinary dividend to the extent paid out of the private company profits and is assessable income of the shareholder under s 44 of the ITAA 1936.

Further, such a payment or transfer to an associate of a shareholder of the private company in satisfaction of an order is a payment for the purposes of s 109C(3) of the ITAA 1936.

When the final Ruling is issued, ATO ID 2004/462 will be withdrawn. It currently states:

"A court order made under section 79 of Part VIII of the FLA 1975 in relation to the parties to a marriage and which results in a private company making a payment (for the purposes of s 109C of the ITAA 1936) to a party to that marriage is not an obligation of the private company to pay money to an entity for the purposes of s 109J of the ITAA 1936."

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