Anti-avoidance Miscellaneous 2013

Dividend access shares and s 177E of Pt IVA: What does TD 2013/D5 say?

Source: Taxation In Australia Journal Article

Published Date: 1 Sep 2013


TD 2013/D5, released in June 2013, is concerned with the potential application of s 177E(1)(a) of the Income Tax Assessment Act 1936 (Cth) to a type of “dividend access share” arrangement described in the draft determination. In brief, the arrangement involves the payment of the accumulated profits of a company to the holder of a newly issued class of shares which carry the right to a dividend solely at the discretion of the company’s directors. However, the economic benefit of the profits continues to be enjoyed by the original shareholder(s) or their associates, but in a tax-free or substantially tax-free form.

This article first examines the type of arrangement described in the draft determination, and then considers the terms of s 177E. The article then looks at the facts and findings in two cases which have considered s 177E, before summarising and commenting on the conclusions expressed in the draft determination.

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Anti-avoidance Miscellaneous 2013

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