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13 Mar 15 Section 23AJ and Subdiv 768-A Consultation

On Tuesday 24 February, Cameron Blackwood ATI (Greenwoods & Herbert Smith Freehills) attended a consultation with the ATO in relation to the interaction between Section 23AJ of the Income Tax Assessment Act 1936 (Cth) and Subdivision 768-A of the Income Tax Assessment Act 1997 (Cth).

A number of issues were discussed, including: 

  • The treatment of share buybacks and cancellation of shares where a shareholding drops below 10% as a result of the buyback/cancellation;
  • The application of Subdiv 768-A to legal form debt that meets the definition of equity under Division 974;
  • Practical issues as to timing of testing the 10% ownership requirement v when amounts are included in assessable income for non-portfolio interests held via a partnership or trust; and
  • How certain entities, such as partnerships and trusts, can meet the “hold” requirement;
  • Given 768-A can apply to legal form debt, there is a need to consider the source of the interest paid on a loan that is eligible for 768-A due to requirements in s.25-90/s.230-15(3) that it be foreign sourced; and
  • Other issues such as the CGT exemption in 768-G now not being aligned with the dividend exemption, together with Div 6C trusts that do no consolidate being eligible for the dividend exemption, but not the CGT exemption – the issue is to be referred to the Tax Issues Entry System register.

Members who require further information in relation to the above should contact us at Tax Policy.