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Dividend access shares: Are they still okay? If so, when?


Discretionary dividend shares or dividend access shares are shares on which dividends can be paid, at the discretion of the directors, to the exclusion of existing shares in a company. They are commonly used for three purposes, namely, asset protection, estate planning and flexibility. Their use raises several taxation issues, including direct value shifting, the debt/equity rules, dividend streaming, Div 7A, dividend stripping and general anti-avoidance issues. Further, their liberal use has now been curtailed by the issue of a recent taxpayer alert, TA 2012/4. This article discusses in detail each of the principal taxation issues raised by the use of such shares.

The author concludes that the use of these shares must be supported by credible evidence, and careful drafting of the documents relating to the creation and issue of the shares, as well as declarations of dividend and subsequent payment, are critical, as is TA 2012/4.

Author profile:

John Ioannou CTA
John was admitted as a Solicitor in 2002 and is a partner at McCullough Robertson. He has experience in the areas of taxation, trusts and estate and succession planning. John has a Bachelor of Arts, Bachelor of Laws and Masters of Law. He is currently Queensland’s representative on the Institute’s National Professional Development Committee, a member of Queensland’s State Council and a member of the Law Council of Australia in the Business Law Section. Current at 04 March 2016 Click here to expand/collapse more articles by John Ioannou.
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