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A frank assessment – TR 2012/5 and s 254T of the Corporations Act 2001


In 2010, the requirement in s 254T of the Corporations Act 2001 (Cth) (that dividends could be paid only out of profits) was replaced by a test that allows a company to pay dividends if all of three requirements are met. Those requirements are that the company’s assets exceed its liabilities and the excess would be enough to fund the dividend, payment of the dividend would be fair and reasonable to the shareholders, and payment would not materially prejudice the company’s ability to pay its creditors. In June 2012, the Commissioner released a taxation ruling, TR 2012/5, which addresses issues that arise in relation to the payment of dividends under the new rules.

This article examines the ruling, by looking first at some of the relevant taxation provisions and then at the amendments that have been made. It also refers to the proposed transaction which was the genesis for the ruling.

Author profile:

Author Photo - Robert Allerdice CTA
Robert Allerdice CTA
Robert has tax experience spanning 33 years, and is currently The Tax Institute's Tax Consultant. In this role, Robert edits TAXVINE, The Tax Institute's weekly email newsletter, and reviews all articles for publication in two of The Tax Institute's journals, Taxation in Australia and the Tax Specialist. Robert also assists in The Tax Institute's Structured Education program, filling the roles of Advanced Tax Convenor and Applied Tax Convenor. Robert was admitted as a solicitor of the NSW Supreme Court in 1974 and practised as a tax lawyer from 1978 to 1993. He then accepted positions as Senior Lecturer, firstly with ATAX at the University of New South Wales, and then at the Law School at the University of Sydney. Robert joined The Tax Institute in June 2000. Current at 01 February 2012 Click here to expand/collapse more articles by Robert Allerdice.
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