INCOME TAX ASSESSMENT ACT 1936
|PART III - LIABILITY TO TAXATION
|Subdivision D - Dividends
Purpose of section
The purpose of this section is to ensure that relevant amounts are treated as dividends for taxation purposes if:
(a) components of a demerger allocation as between capital and profit do not reflect the circumstances of a demerger; or
(b) certain payments, allocations and distributions are made in substitution for dividends.
Application of section
This section applies if:
(a) there is a scheme under which a person is provided with a demerger benefit or a capital benefit by a company; and
(b) under the scheme, a taxpayer (the relevant taxpayer), who may or may not be the person provided with the demerger benefit or the capital benefit, obtains a tax benefit; and
(c) having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling a taxpayer (the relevant taxpayer) to obtain a tax benefit.
Commissioner to determine that section 45BA or 45C applies
The Commissioner may make, in writing, a determination that:
(a) section 45BA applies in relation to the whole, or a part, of the demerger benefit; or
(b) section 45C applies in relation to the whole, or a part, of the capital benefit.
A determination does not form part of an assessment.
If section 45BA applies in relation to the whole, or a part, of a demerger benefit, this benefit may be a capital benefit.
Meaning of provided with a demerger benefit
A person is provided with a demerger benefit if in relation to a demerger:
(a) a company provides the person with ownership interests in that or another company; or
(b) something is done in relation to an ownership interest owned by the person that has the effect of increasing the value of an ownership interest (which may or may not be the same ownership interest) owned by the person.
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Meaning of provided with a capital benefit
A reference to a person being provided with a capital benefit is a reference to any of the following:
(a) the provision of ownership interests in a company to the person;
(c) something that is done in relation to an ownership interest that has the effect of increasing the value of an ownership interest (which may or may not be the same interest) that is held by the person.
However, a person is not provided with a capital benefit to the extent that the provision of interests, the distribution or the thing done referred to in subsection (5) involves the person receiving a demerger dividend.
For the purposes of this section, a non-share distribution to an equity holder is taken to be the distribution to the equity holder of share capital to the extent to which it is a non-share capital return.
Meaning of relevant circumstances of scheme
The relevant circumstances of a scheme include the following:
(a) the extent to which the demerger benefit or capital benefit is attributable to capital or the extent to which the demerger benefit or capital benefit is attributable to profits (realised and unrealised) of the company or of an associate (within the meaning in section 318) of the company;
(b) the pattern of distributions of dividends, bonus shares and returns of capital or share premium by the company or by an associate (within the meaning in section 318) of the company;
(c) whether the relevant taxpayer has capital losses that, apart from the scheme, would be unutilised (within the meaning of the Income Tax Assessment Act 1997) at the end of the relevant year of income;
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(d) whether some or all of the ownership interests in the company or in an associate (within the meaning in section 318) of the company held by the relevant taxpayer were acquired, or are taken to have been acquired, by the relevant taxpayer before 20 September 1985;
(e) whether the relevant taxpayer is a non-resident;
(f) whether the cost base (for the purposes of the Income Tax Assessment Act 1997) of the relevant ownership interest is not substantially less than the value of the applicable demerger benefit or capital benefit;
(h) if the scheme involves the distribution of share capital or share premium - whether the interest held by the relevant taxpayer after the distribution is the same as the interest would have been if an equivalent dividend had been paid instead of the distribution of share capital or share premium;
(i) if the scheme involves the provision of ownership interests and the later disposal of those interests, or an increase in the value of ownership interests and the later disposal of those interests:
(i) the period for which the ownership interests are held by the holder of the interests; and
(ii) when the arrangement for the disposal of the ownership interests was entered into;
(j) for a demerger only:
(i) whether the profits of the demerging entity and demerged entity are attributable to transactions between the entity and an associate (within the meaning in section 318) of the entity; and
(ii) whether the assets of the demerging entity and demerged entity were acquired under transactions between the entity and an associate (within the meaning in section 318) of the entity;
S 45B(8) amended by No 101 of 2013, s 3 and Sch 1 item 1, by substituting "subsection 177D(2)" for "subparagraphs 177D(b)(i) to (viii)" in para (k), applicable in relation to all schemes except schemes that were entered into, or that were commenced to be carried out, on or before 15 November 2012.
S 45B(8) amended by No 88 of 2013, s 3 and Sch 6 items 1 and 2, by inserting "the following" after "of a scheme include" and substituting "unutilised (within the meaning of the Income Tax Assessment Act 1997) at the end of the relevant" for "carried forward to a later" in para (c), effective 29 June 2013.
Meaning of obtaining a tax benefit
A relevant taxpayer obtains a tax benefit if an amount of tax payable, or any other amount payable under this Act, by the relevant taxpayer would, apart from this section, be less than the amount that would have been payable, or would be payable at a later time than it would have been payable, if the demerger benefit had been an assessable dividend or the capital benefit had been an assessable dividend.
S 45B(9) amended by No 56 of 2010, s 3 and Sch 6 item 124, by substituting "an assessable dividend." for "a dividend.", applicable to capital benefits provided on or after 30 November 2009. The amendment is to be disregarded for the purposes of interpreting s 45B(9) as in force before 3 June 2010.
In this section:
scheme has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.
S 45B(10) substituted by No 56 of 2010, s 3 and Sch 6 item 126, effective 3 June 2010. S 45B(10) formerly read:
45B(10) Expressions to have same meanings as in Part IIIAA.
Expressions used in this section that are defined in Part IIIAA have the same meanings as in that Part.
S 45B and 45BA substituted for s 45B by No 90 of 2002.
S 45B amended by No 163 of 2001, No 58 of 2000 and inserted by No 63 of 1998.