10 Feb 12 Preamble - Friday 10 February
This week has seen some media coverage of the significant uncertainty in relation to whether dividends paid in accordance with the revised section 254T of the Corporations Act 2001 may be franked.
Treasury released a discussion paper late last year relating to the test for payment of dividends, parent entity reporting requirements and the conditions for changing the financial year of a company. The dividends test was amended in 2010 to replace the profits-based test with a net assets test.
We have raised concerns with Treasury about various aspects of the new dividends test. At the same time, the ATO has followed up its earlier fact sheets on the issue with a draft ruling, on which we are preparing a separate response.
What is disappointing is that the Tax Office is putting out draft interpretations that are contradicting what Treasury is describing as the intent of the legislation. There are public companies that don’t even know what dividends they can pay. Business hates nothing more than uncertainty and this is a cause of extreme frustration. The ATO should be party to the design of any new provisions to ensure that there are no unintended tax consequences and that there is a common understanding of the intended interpretation and application of these rules.
We will keep you posted on our discussions.
Please see below for details of other activities this week.
Robert Jeremenko FTIA