Chapter BB Buy-backs of shares and non-share equity interests

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Chapter BB Buy-backs of shares and non-share equity interests"

Transcription

1 Chapter BB Buy-backs of shares and non-share equity interests Outline of chapter 1.1 Schedule BB to this Bill implements the recommendations of the Board of Taxation to improve the taxation arrangements relating to the buy-back of shares and non-share equity interests. Context of amendments 1.2 The provisions relating to the buy-back of shares and non-share equity interests are currently contained in Division 16K of Part III of the Income Tax Assessment Act 1936 (ITAA 1936). 1.3 Division 16K applies where a company buys back a share or non-share equity interest in itself and cancels the share or interest. In these circumstances, no income tax consequences arise for the company (the buying company) that acquires a share or non-share equity interest under the buy-back. 1.4 The taxation consequences for a taxpayer who disposes of a share or non-share equity interest under an off-market buy-back (the seller) depend on whether the buy-back is an off-market buy-back or an on-market buy-back. 1.5 If the buy-back is an off-market buy-back, a part of the proceeds paid to the seller may be taxed as a frankable dividend. The rationale for this approach is that some of the proceeds effectively represent a distribution of the buying company s profits to the seller. 1.6 If the buy-back is an on-market buy-back, all the proceeds paid to the seller are taxed as an ordinary disposal of shares or non-share equity interests. 1.7 In October 2006, the former government requested the Board of Taxation to undertake a review of the taxation treatment of off-market buy-backs. 1

2 Tax Laws Amendment (2011 Measures No. 9) Bill The Board of Taxation completed its report to the Treasurer in June In broad terms, the Board concluded that the current taxation treatment of off-market buy-backs is appropriate and recommended that Division 16K be rewritten and transferred to the Income Tax Assessment Act 1997 (ITAA 1997) with several refinements to reduce compliance costs and administration costs. 1.9 As part of the Budget, the Government agreed to implement the recommendations in the Board s report. Summary of new law 1.10 Schedule BB to this Bill implements the recommendations of the Board of Taxation to improve the taxation arrangements relating to the buy-back of shares and non-share equity interests In broad terms, the Schedule rewrites the taxation rules relating to buy-backs of shares and non-share equity interests and transfers them from Division 16K of Part III of the ITAA 1936 to Division 190 of the ITAA Consistent with the recommendations of the Board of Taxation, some changes are made to: specify a method for working out the capital/dividend split, with a discretion available to the Commissioner of Taxation to permit the use of other methods when appropriate; where the approved method for determining the capital/dividend split is used, switch off the application of certain integrity provisions; where the off-market buy-back is conducted by a listed company: deny notional losses on the disposal of the shares or non-share equity interests; remove the market value uplift rule (which increases the consideration received where the purchase price of a share or non-share equity interest under the buy-back is less than its market value); and extend the time for giving a distribution statement in respect of the dividend or non-share dividend component; and 2

3 Buy backs of shares and non share equity interests specify the amount of a franking debit that arises in the franking account of a company conducting an off-market buy-back where the company has foreign resident shareholders. Comparison of key features of new law and current law New law When a company conducts an off-market buy-back, part of the purchase price of the share or non-share equity interest that is bought back may be taken to be a dividend that can be franked. The capital/dividend split can be worked out based on the average capital per share or using another method approved by the Commissioner. If the average capital per share method is used, certain integrity rules in the income tax law do not apply. The remaining part of the purchase price is taken to be consideration received for the purpose of working out the amount of gain or loss on the disposal of the share or non-share equity interest. However, the consideration received is increased where: the dividend component is not fully taxed; if the buy-back is conducted by a listed company, a notional loss would otherwise arise on the disposal of the shares or interests; if the buy-back is conducted by a listed company: the purchase price is less than the market value; or the seller is a corporate tax entity and part of the purchase price is a franked dividend. Off-market buy-backs Current law When a company conducts an off-market buy-back, part of the purchase price of the share or non-share equity interest that is bought back may be taken to be a dividend that can be franked. The remaining part of the purchase price is taken to be consideration received for the purpose of working out the amount of gain or loss on the disposal of the share or non-share equity interest. However, the consideration received is increased where: the dividend component is not fully taxed; the purchase price is less than the market value; or the seller is a corporate tax entity and part of the purchase price is a franked dividend. The Commissioner applies integrity rules in the income tax law to: control the basis for working out the dividend/capital split and the amount of the dividend component; and cause a debit to arise in the franking account of the company conducting the buy-back where the company has foreign resident shareholders. No taxation consequences arise for the buying company as a result of the acquisition and cancellation of the 3

4 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 No taxation consequences arise for the buying company as a result of the acquisition and cancellation of the shares. However, to the extent that the purchase price exceeds the market value, the dividend or non-share dividend component is unfrankable. In addition, the buying company must give a distribution statement in respect of the dividend or non-share dividend on or before the day on which the distribution is made. However, if the buying company is a listed company, the time for giving the distribution statement is seven days after the distribution is made. No change. shares. On-market buy-backs However, to the extent that the purchase price exceeds the market value, the dividend or non-share dividend component is unfrankable. In addition, the buying company must give a distribution statement in respect of the dividend or non-share dividend on or before the day on which the distribution is made. When a company conducts an on-market buy-back, no part of the purchase price of the share or non-share equity interest that is bought back is taken to be a dividend. Instead, the whole of the purchase price is taken to be consideration received for the purposes of working out the amount of gain or loss on the disposal on the share or non-share equity interest. No taxation consequences arise for the buying company as a result of the acquisition and cancellation of the shares. In addition, in some circumstances a franking debit will arise in the franking account of the buying company. 4

5 Buy backs of shares and non share equity interests Detailed explanation of new law 1.13 A buy-back occurs where a company (the buying company) purchases shares or non-share equity interests in itself from a member or non-share equity holder (the seller), and cancels the shares The taxation consequences that arise under a buy-back depend on whether the buy-back is an off-market buy-back or an on-market buy-back. Off-market buy-backs 1.15 A buy-back of a share or non-share equity interest is an off-market buy-back unless: the share or non-share equity interest is listed for quotation on an approved stock exchange; and the purchase is made in the ordinary course of trading on that stock exchange. [Schedule BB, items 11 and 23, section and the definition of off-market buy-back in subsection 995-1(1)] 1.16 If a company undertakes an off-market buy-back: part of the purchase price paid to the seller is taken to be a dividend or non-share dividend (Subdivision 190-A); modifications apply for the purpose of determining the amount of consideration received by the seller on the disposal of the shares or non-share equity interests in some circumstances (Subdivision 190-B) this is relevant for determining the amount of the gain or loss made by the seller on the disposal of the shares or interests; no taxation consequences arise for the buying company (Subdivision 190-C); and various implications arise under the imputation system (Subdivision 190-C). 5

6 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 Off-market buy-backs: Part of the purchase price taken to be a dividend 1.17 If a company conducts an off-market buy-back, part of the purchase price is taken to be a dividend or non-share dividend if there is a difference between: the purchase price for the share or non-share equity interest; and the capital component for the share or non-share equity interest. [Schedule BB, item 11, subsection 190-5(1)] 1.18 The amount of the dividend or non-share dividend is the amount of the difference between the purchase price and the capital component. [Schedule BB, item 11, subsection 190-5(2)] 1.19 In addition, to ensure that the amount that is taken to be a dividend or non-share dividend is included in the seller s assessable income under section 44 of the ITAA 1936, the dividend or non-share dividend component is taken to be paid on the day of the buy-back out of profits derived by the company. [Schedule BB, item 11, subsection 190-5(3)] What is the purchase price? 1.20 The purchase price for a share or non-share equity interest under an off-market buy-back is the sum of: all amounts of money that the member or non-share equity holder is entitled to receive in respect of the buy-back; and the market value at the time of the buy-back of any property (other than money) that the member or non-share equity holder is entitled to receive in respect of the buy-back. [Schedule BB, item 11, subsection 190-5(4)] What is the capital component? 1.21 The capital component of the purchase price for a share or non-share equity interest under an off-market buy-back is: for a share that part of the purchase price which is debited against the company s share capital account; or 6

7 Buy backs of shares and non share equity interests for an non-share equity interest that part of the purchase price which is debited against the company s share capital account or non-share capital account. [Schedule BB, item 11, subsection 190-5(5)] 1.22 The amount of the capital component of the purchase price for a share or non-share equity interest is: the average capital amount; or the amount worked out under another calculation method approved by the Commissioner of Taxation. [Schedule BB, item 11, subsection (1)] 1.23 For a share, the average capital amount is worked out using the formula: Amount held in the company's share capital account Number of shares on issue [Schedule BB, item 11, subsection (2)] 1.24 For a non-share equity interest, the average capital amount is worked out using the formula: Amount held in the company's non -share capital account Number of non-share equity interests on issue [Schedule BB, item 11, subsection (3)] Example 1.1 In 2005 Company B issued 1000 shares for $2 each. In November 2011 the shares are listed for $2.50 each on the Australian stock exchange. Company B conducts an off-market share buy-back and buys back the shares for $2.50 each. The average capital amount is worked out using the formula: Therefore: Amount held in Company B's share capital account Number of shares on issue the average capital amount is $2 (that is, $2000 / 1000); and 7

8 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 the dividend component is $0.50 (that is, the total purchase price ($2.50) less the average capital amount ($2) In some circumstances a company that undertakes an off-market share buy-back may consider that the average capital amount results in an insufficient amount being treated as the capital component of the purchase price. Therefore, the company can seek the Commissioner s approval to use another method to work out the capital component. Other methods that have previously been accepted by the Commissioner in appropriate circumstances are: the share capital/retained earnings ratio (or slice approach); and the embedded value method. Certain imputation system integrity rules do not apply to listed companies 1.26 Currently, a listed company that undertakes an off-market share buy-back generally needs to seek a ruling from the Commissioner to clarify that certain imputation system integrity rules do not apply to the buy-back. The ruling is necessary to provide certainty for the holders of shares or non-share equity interests in the company who are eligible to participate in the buy-back Therefore, to provide greater certainty and to reduce compliance costs, these integrity rules will not apply if: the shares or non-share equity interests in the company conducting the buy-back are listed for quotation on an official list of an approved stock exchange; and the amount of the capital component of the purchase price for a share or non-share equity interest is the average capital amount. [Schedule BB, item 11, subsection (1)] 1.28 The imputation system integrity rules that do not apply in these circumstances are: section of the ITAA 1997, which operates where imputation benefits are streamed; section 45A of the ITAA 1936, which operates where capital benefits and dividends are streamed; 8

9 Buy backs of shares and non share equity interests section 45B of the ITAA 1936, which operates when a company enters into a scheme to provide capital benefits or demerger benefits; and section 177EA of the ITAA 1936, which operates when a company enters into a scheme to provide imputation benefits. [Schedule BB, item 11, subsection (2)] 1.29 The imputation system integrity rules are switched off only if the listed company uses the average capital per share method to work out the capital component. If that method is used, the opportunities for streaming imputation system benefits are minimised If a company seeks the Commissioner s discretion to use another method to work out the capital component, the imputation system integrity rules still operate. This is because other methods can give rise to the streaming of imputation system benefits in some circumstances. Off-market buy-backs: Amount of consideration received by the seller 1.31 When a share or non-share equity interest is disposed of by a member or equity holder (the seller) under an off-market buy-back, the seller will generally: make a capital gain or capital loss; or make a revenue gain or revenue loss The amount of the gain or loss will generally be the amount of the difference between: the amount of consideration received by the seller on the disposal of the share or interest; and the amount paid to acquire (or reduced cost base of) the share or interest For these purposes, the amount of consideration received by the seller on the disposal of a share or non-share equity interest will generally be: if part of the purchase price is taken to be a dividend or non-share dividend, the capital component of the purchase price for the share or interest worked out under subsection 190-5(5); or 9

10 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 if no part of the purchase price is taken to be a dividend or non-share dividend, the purchase price for the share or interest. [Schedule BB, item 11, section ] 1.34 However, for the purpose of working out the amount of gain or loss made by the seller on the disposal of a share or non-share equity interest, the amount of consideration received is increased if, broadly: the dividend component is not fully taxed; the buy-back is conducted by a listed company and the seller makes a notional loss; the buy-back is conducted by an unlisted company and the purchase price of the share or interest is less than its market value; or the buy-back is conducted by an unlisted company that franks the dividend component and the seller is a corporate tax entity which makes a notional loss In some circumstances more than one provision could apply to increase the amount of consideration that is taken to be received by the seller. In that event, the amount of consideration that is taken to be received by the seller is increased by the amount of the adjustment under each provision. Consideration received increased if dividend component not fully taxed 1.36 If part of the purchase price of shares or non-share equity interests under an off-market buy-back is taken to be a dividend or non-share dividend, the amount of the dividend is included in the seller s assessable income under section 44 of the ITAA Alternatively, if the seller is a non-resident, the dividend will be taxed indirectly because: the dividend will be fully franked; or the dividend will be subject to dividend withholding tax. 10

11 Buy backs of shares and non share equity interests 1.38 However, in some circumstances the seller may not be taxed, directly or indirectly, on all or part of the dividend component. This could happen, for example, if the amount that is taken to be a dividend is specifically exempt from tax under section 23AJ of the ITAA 1936 because it is a non-portfolio dividend paid by a non-resident company In these circumstances, unless the dividend is paid out of realised profits, the amount of consideration received is increased to ensure that the seller pays Australian tax on the dividend component of the purchase price That is, the amount of consideration received is increased if a part of the dividend or non-share dividend that is taken to be paid is not included in the assessable income of the seller, and: is debited against a share capital account, non-share capital account or asset revaluation reserve; or is attributable directly or indirectly to amounts transferred from a share capital account, non-share capital account or asset revaluation reserve. [Schedule BB, item 11, subsection (1)] 1.41 In these circumstances, the amount of consideration received by the seller is taken to be the capital component of the purchase price increased by the part of the dividend or non-share dividend that is untaxed. [Schedule BB, item 11, subsection (2)] 1.42 However, for the purpose of determining whether a part of the dividend or non-share dividend that is taken to be paid is not included in the assessable income of the seller, the following provisions which treats certain amounts as non-assessable non-exempt income, are disregarded: section of the ITAA 1997, which applies to a distribution made by an Australian corporate tax entity to a foreign resident to the extent that the distribution is conduit foreign income; and section 128D of the ITAA 1936, which applies to dividends that are subject to dividend withholding tax. [Schedule BB, item 11, subsection (3)] 11

12 Tax Laws Amendment (2011 Measures No. 9) Bill In addition, for the purpose of determining whether a part of the dividend or non-share dividend that is taken to be paid is debited against a share capital account, non-share capital account or asset revaluation reserve, or is attributable directly or indirectly to amounts transferred from such an account, the dividend or non-share dividend is taken to have been debited against the account or reserves against which the purchase price was debited, and to the same extent. [Schedule BB, item 11, subsection (4)] 1.44 A share capital account is defined in subsection of the ITAA 1997 to mean, broadly, an account that a company keeps of its share capital. However, if a company transfers amounts to its share capital account from other accounts, the company s share capital account may become tainted. In most cases, if a company s share capital account becomes tainted, the account is no longer treated as a share capital account For the purpose of applying section , a tainted share capital account continues to be treated as a share capital account. This prevents the operation of section being avoided by a company tainting its share capital account. [Schedule BB, items 20 to 22, subsection (3)] 1.46 An asset revaluation reserve is a reserve (however called) comprising profits arising from the revaluation of an asset or assets to the extent that those profits have not been realised by disposing of the asset. If a reserve contains such profits in addition to other amounts, only that part of the reserve comprising the revaluation profits is taken to be an asset revaluation reserve. In such a case, the company will determine to what extent a debit to the reserve is a debit to that part of the reserve comprising profits arising from the revaluation of assets which have not been disposed of. Consideration received increased if the buy-back is conducted by a listed company and the seller makes a notional loss 1.47 If part of the purchase price of shares or non-share equity interests under an off-market buy-back is taken to be a dividend or non-share dividend, then the seller could make a capital loss or revenue loss on the disposal of the share or non-share equity interest A loss will arise if the capital component is less than the amount paid to acquire (or reduced cost base of) the share or interest. To the extent that the loss arises because part of the purchase price is taken to be a dividend or non-share dividend, the loss is a notional loss. 12

13 Buy backs of shares and non share equity interests 1.49 The Board of Taxation recommended that, where an off-market buy-back is conducted by a listed company, notional losses should be denied. The Board concluded that the denial of notional losses will make shareholder compliance simpler and easier and make the treatment of amounts received on the disposal of shares or non-share equity interests under an off-market buy-back more consistent with other parts of the law, including the outcomes that arise when a company cancels shares or goes into liquidation Although the Board of Taxation acknowledged that the denial of notional losses will reduce returns for some taxpayers who participate in off-market buy-backs conducted by listed companies, the Board considered that, when viewed in combination with its other recommendations, the overall outcomes result in a balanced package Therefore, consistent with the recommendation of the Board of Taxation, the amount of consideration received is increased if: the shares or non-share equity interests in the company conducting the off-market buy-back are listed for quotation in the official list of an approved stock exchange just before the buy-back; and a loss would be realised for income tax purposes for the seller in respect of the buy-back (ignoring this adjustment). [Schedule BB, item 11, subsection (1)] 1.52 In these circumstances, the amount of consideration received by the seller is taken to be the capital component of the purchase price increased by the lesser of: the amount of the loss; and the amount of the purchase price that is taken to be a dividend or non-share dividend. [Schedule BB, item 11, subsection (2)] Example 1.2 Katherine receives a purchase price of $100 in respect of an off-market buy-back of shares by Company M, a listed company. Company M debits $70 against its share capital account. Company M is taken to pay Katherine a dividend of $30 (section 190-5). Katherine has a cost base and reduced cost base of $90 for the shares and must work out a capital gain or loss on the disposal. 13

14 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 Example 1.3 Apart from section , Katherine would be taken to have received the $70 capital component in respect of the buy-back. However, this would give Katherine a capital loss of $20 (that is, the reduced cost base ($90) less the capital component ($70)). Section applies to increase the amount of consideration received by $20 (which is the lesser of the dividend amount ($30) and the loss amount ($20)). Therefore, the amount of consideration that is taken to be received by Katherine is $90. Katherine s capital loss after applying section is nil (that is, the reduced cost base ($90) less the consideration received ($90)). Kenny receives a purchase price of $100 in respect of an off-market buy-back of shares by Company C, a listed company. Company C debits $60 against its share capital account. Company C is taken to pay Kenny a dividend of $40 (section 190-5). Kenny has a cost base and reduced cost base of $120 for the shares and must work out a capital gain or loss on the disposal. Apart from section , Kenny would be taken to have received the $60 capital component in respect of the buy-back. However, this would give Kenny a capital loss of $60 ((that is, the reduced cost base ($120) less the capital component ($60)). Section applies to increase the amount of consideration received by $40 (which is the lesser of the dividend amount ($40) and the loss amount ($60)). Therefore, the amount of consideration that is taken to be received by Kenny is $100. Kenny s capital loss after applying section is $20 (that is, the reduced cost base ($120) less the consideration received ($100)). Consideration received increased if the buy-back is conducted by an unlisted company and the purchase price is less than market value 1.53 Tax advantages may be obtained if an off-market share buy-back could be conducted by an unlisted company at a price lower than the market value of the share or non-share equity interest that is bought back. In such a case, the taxable gain on the disposal of the share or interest could be reduced or a tax loss could be created Therefore, the amount of consideration received is increased if: 14

15 Buy backs of shares and non share equity interests the shares or non-share equity interests in the company conducting the off-market buy-back are not listed for quotation in the official list of an approved stock exchange just before the buy-back; and the amount that would have been the market value of the share or interest at the time of the buy-back if the buy-back did not occur and was never proposed to occur exceeds the purchase price for the share or interest. [Schedule BB, item 11, subsection (1)] 1.55 In these circumstances, the amount of consideration received by the seller is taken to be the capital component of the purchase price increased by the amount by which the market value of the share or interest exceeds its purchase price. [Schedule BB, item 11, subsection (2)] 1.56 Under the current law, this market value uplift rule applies to off-market buy-backs conducted by both listed and unlisted companies. The Board of Taxation recommended that the market value uplift rule no longer apply to off-market buy-backs conducted by listed companies. This is because, where an off-market buy-back is conducted by a listed company, section applies to increase the consideration received by a seller and deny any notional losses. Consideration received increased if the buy-back is conducted by an unlisted company that franks the dividend component and the seller is a corporate tax entity which makes a notional loss 1.57 Where a corporate tax entity disposes of shares or non-share equity interests under an off-market buy-back conducted by an unlisted company and the dividend component of the purchase price is franked, the consideration received is increased to deny notional losses. This is appropriate because corporate tax entities effectively pay no tax on the franked dividends Therefore, the amount of consideration received is increased if: the shares or non-share equity interests in the company conducting the off-market buy-back are not listed for quotation in the official list of an approved stock exchange just before the buy-back; a loss would be realised for income tax purposes for the seller in respect of the buy-back (ignoring this adjustment); and 15

16 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 the seller is a corporate tax entity that is entitled to a tax offset for franking credits attached to the dividend or non-share dividend component of the purchase price. [Schedule BB, item 11, subsection (1)] 1.59 In these circumstances, the amount of consideration received by the seller is taken to be the capital component of the purchase price increased by the lesser of: the amount of the loss; and the amount worked out applying the formula: Amount of tax offset 100% Corporate tax rate Corporate tax rate [Schedule BB, item 11, subsection (2)] 1.60 Under the current law, corporate tax entities are denied notional losses in respect of off-market buy-backs conducted by both listed and unlisted companies where the dividend component of the purchase price is franked. However, section applies only to off-market buy-backs conducted by unlisted companies because, where an off-market buy-back is conducted by a listed company, section applies to increase the consideration received by a seller and deny notional losses in all cases. Off-market buy-backs: Tax neutral for buying companies 1.61 When a company conducts an off-market buy-back, the buy-back and subsequent cancellation of the shares or non-share equity interests are disregarded for the purpose of working out whether: the company makes a capital gain or capital loss; the company has an amount included in their assessable income (other than as a capital gain); or the company is allowed a deduction. [Schedule BB, item 11, section ] 1.62 As a result, the buy-back is effectively tax neutral for the buying company. Therefore, the buying company will not, for example, make a capital gain or loss as a result of the cancellation of the shares. In addition, the buying company is not allowed a deduction in respect of any expenditure incurred in respect of the buy-back. 16

17 Buy backs of shares and non share equity interests Off-market buy-backs: Imputation system rules 1.63 When a company conducts an off-market buy-back, the imputation system is modified so that: the dividend or non-share dividend component is unfrankable to the extent that the purchase price of the share or interest exceeds its market value; if the buy-back is conducted by a listed company, the time for giving distribution statements is extended; and a franking debit arises in the company s franking account if it has foreign resident shareholders. Dividend component unfrankable where the purchase price is greater than market value 1.64 If a company conducts an off-market buy-back, the company can generally attach franking credits to the dividend or non-share dividend component of the purchase price However, as an integrity rule, the dividend or non-share dividend is unfrankable to the extent that the purchase price for the share or non-share equity interest exceeds the market value (as normally understood) of the share or interest at the time of the buy-back assuming that the buy-back did not occur and was never proposed to occur. [Schedule BB, items 11 and 12, section and paragraph (c)] 1.66 This integrity rule prevents a company from being able to pass on franking credits to sellers which could not ordinarily be accessed where: the amount of the purchase price for a share or non-share equity interest exceeds its market value; and the excess purchase price is taken to be a dividend or non-share dividend. Extension of the time for listed companies to give distribution statements 1.67 A company that makes a franked distribution must give the recipient a distribution statement. Generally, the distribution statement must be given on or before the day on which the distribution is made (section of the ITAA 1997). 17

18 Tax Laws Amendment (2011 Measures No. 9) Bill Listed companies that undertake off-market buy-backs often have difficulty in satisfying the requirement to give recipients a distribution statement on or before the day the distribution is made. This difficulty arises because of the buy-back process used by listed companies Therefore, the time for giving a distribution statement for a frankable distribution is extended if: the distribution is a dividend or a non-share dividend paid in relation to a share or non-share equity interest under an off-market buy-back; and the shares or interests are listed for quotation in the official list of an approved stock exchange just before the buy-back. [Schedule BB, items 11 and 13, section and the note to subsection (2)] Franking debit where companies have foreign resident shareholders 1.70 A primary attraction for companies to use off-market buy-backs as a capital management tool is that part of the purchase price is treated as a frankable dividend or non-share dividend for income tax purposes. Consequently, shareholders and non-share equity interest holders who can fully utilise franking credits have greater incentive to participate in off-market buy-backs than other shareholders or interest holders As a result, when a company undertakes an off-market buy-back, the Commissioner routinely applies the general anti-avoidance provision in section 177EA of the ITAA 1936 to debit the company s franking account to prevent the streaming of franking credits from foreign resident shareholders or interest holders to Australian resident shareholders or interest holders The Board of Taxation concluded that it is appropriate to protect the Australian tax base by preventing the streaming of franking credits from foreign resident shareholders or interest holders to Australian resident shareholders or interest holders. However, the Board recommended that, to ease compliance costs, a specific provision should cause a franking debit to arise in the company s franking account and specify the basis for working out the amount of the franking debit Therefore, a franking debit will arise in the franking account of a company conducting an off-market buy-back if: just before the buy-back, one or more foreign residents are members or equity holders in the company; and 18

19 Buy backs of shares and non share equity interests the dividend or non-share dividend component of the purchase price is franked to any extent. [Schedule BB, items 11 and 14, subsections (1) and (1)] 1.74 The franking debit will arise in the franking account of a company conducting the off-market buy-back on the day of the buy-back. [Schedule BB, items 11 and 14, subsections (5) and (1)] 1.75 The amount of the franking debit that arises in the franking account of the company conducting the off-market buy-back is worked out using the formula: where: Franking credits allocated Number of foreign interests Number of total interests Corporate tax rate Weighted WHT rate Corporate tax rate the franking credits allocated is the sum of the franking credits allocated to all the franked distributions for the shares and non-share equity interests bought back; the number of foreign interests is the number of shares or non-share equity interests in the company that: are held just before the buy-back by foreign residents; are of the same kind as those bought back; and are not bought back; the number of total interests is the number of shares or non-share equity interests in the company just before the buy-back of the same kind as those bought back (including those that are bought back); and the weighted WHT rate is the weighted average of the rates set out in subsection (3) for the foreign interests. 19

20 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 [Schedule BB, items 11 and 14, subsections (2) and (1)] 1.76 For the purpose of working out the weighted WHT rate, the rate for a foreign interest is: the rate set out in paragraph 7(a) of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 currently 30 per cent; or if the member who holds the foreign interest is a resident of a country that Australia has a double tax agreement with, the rate of withholding tax applying to dividends under the relevant double tax agreement. [Schedule BB, item 11, subsections (3) and (4)] 1.77 The company can use the register of its members just before the buy-back to determine whether a member is a resident of a country that Australia has a double tax agreement with. [Schedule BB, item 11, subsection (4)] On-market buy-backs 1.78 A buy-back of a share or non-share equity interest is an on-market buy-back if: the share or non-share equity interest is listed for quotation on an approved stock exchange; and the purchase is made in the ordinary course of trading on that stock exchange. [Schedule BB, items 11 and 25, section and the definition of on-market buy-back in subsection 995-1(1)] 1.79 If a company undertakes an on-market buy-back: no part of the purchase price paid to the seller is taken to be a dividend or non-share dividend (section ); the purchase price is the amount of consideration that is taken received by the seller on the disposal of the shares or non-share equity interests (section ) this is relevant for determining the amount of the gain or loss made by the seller on the disposal of the shares or interests; no taxation consequences arise for the buying company (section ); and 20

21 Buy backs of shares and non share equity interests a franking debit arises in the franking account of the buying company in some circumstances (section ). No part of the purchase price is taken to be a dividend 1.80 If a company conducts an on-market buy-back, no part of the purchase price is taken to be a dividend or non-share dividend. [Schedule BB, item 11, subsection (1)] 1.81 The purchase price for a share or non-share equity interest under an on-market buy-back is the sum of: all amounts of money that the member or non-share equity holder is entitled to receive in respect of the buy-back; and the market value at the time of the buy-back of any property (other than money) that the member or non-share equity holder is entitled to receive in respect of the buy-back. [Schedule BB, item 11, subsection (2)] Amount of consideration received by the seller 1.82 When a share or non-share equity interest is disposed of by a member or equity holder (the seller) under an on-market buy-back, the seller will generally: make a capital gain or capital loss; or make a revenue gain or revenue loss The amount of the gain or loss will generally be the amount of the difference between: the amount of consideration received by the seller on the disposal of the share or interest; and the amount paid to acquire (or reduced cost base of) the share or interest For these purposes, the amount of consideration received by the seller on the disposal of a share or non-share equity interest is equal to the purchase price for the share or interest. [Schedule BB, item 11, section ] 21

22 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 Tax neutral for buying companies 1.85 When a company conducts an on-market buy-back, the buy-back and subsequent cancellation of the shares or non-share equity interests are disregarded for the purpose of working out whether: the company makes a capital gain or capital loss; the company has an amount included in their assessable income (other than as a capital gain); or the company is allowed a deduction. [Schedule BB, item 11, section ] 1.86 As a result, the buy-back is effectively tax neutral for the buying company. Therefore, the buying company will not, for example, make a capital gain or loss as a result of the cancellation of the shares. In addition, the buying company is not allowed a deduction in respect of any expenditure incurred in respect of the buy-back. Franking debit arises in the franking account of the buying company 1.87 A franking debit will arise in the franking account of a company conducting an on-market buy-back if a franking debit would have arisen if: the purchase of the share or interest were a frankable distribution equal to the one that would have arisen if the buy-back had been an off-market share buy-back; and the distribution were franked at the entity s bench market franking percentage for the franking period in which the purchase was made or, if the entity does not have a benchmark franking percentage for the period, at a franking percentage of 100 per cent. [Schedule BB, items 11 and 15, subsections (1) and (1)] 1.88 The franking debit will arise in the franking account of a company conducting the on-market buy-back on the day of the buy-back. [Schedule BB, items 11 and 15, subsections (3) and (1)] 1.89 The amount of the franking debit that arises in the franking account of the company conducting the on-market buy-back is the amount of the franking debit that would have arisen. [Schedule BB, items 11 and 15, subsections (2) and (1)] 22

23 Buy backs of shares and non share equity interests Application and transitional provisions 1.90 These amendments apply to off-market buy-backs and on-market buy-backs announced by the company conducting the buy-back after the day this Bill receives Royal Assent. [Schedule BB, item 26] Consequential amendments 1.91 Consequential amendments will: repeal the existing provisions relating to buy-backs in Division 16K of Part III of the ITAA 1936; update the check lists in section 10-5 and 12-5 of the ITAA 1997; update references to the buy-back provisions in the capital gains tax provisions (including, for example, a note to clarify that the amount of consideration received under an off-market buy-back or an on-market buy-back is treated as capital proceeds for capital gains tax purposes); update a reference to the buy-back provisions in the taxation of financial arrangement provisions; update references to the buy-back provisions in the value shifting provisions; and repeal a redundant definition of off-market purchase. [Schedule BB, items 1 to 4, 6 to 10, 16 to 19 and 24, sections 10-5, 12-5, , , 118-1, , , , , and 995-1] Legislative history of Division 16K 1.92 Division 16K of Part III of the ITAA 1936 was added by Taxation Laws Amendment Act (No. 3) 1990 [Act No.58 of 1990]. 23

24 Tax Laws Amendment (2011 Measures No. 9) Bill These Acts have amended Division 16K. Act title Act No. Effect of amendments Taxation Laws Amendment Act (No. 2) 1994 Taxation Laws Amendment Act (No. 3) 1995 Taxation Laws Amendment Act (No. 1) 1996 Tax Laws Improvement Act (No. 1) 1998 Taxation Laws Amendment (Company Law Review) Act of 1994 The amendments ensured that the consideration received under an off-market buy-back included the amount of a rebatable dividend paid in relation to a revaluation reserve. 170 of 1995 The amendments were consequential upon the introduction of the former disqualifying account rules which prevented dividends paid out of share capital accounts or asset revaluation reserves from being rebatable or frankable. 31 of 1996 The amendments introduced modifications to increase the amount of consideration received where: the purchase price is less than the market value; the dividend component is not fully taxed; or the seller is a corporate tax entity and part of the purchase price is a franked dividend. 46 of 1998 The amendments were minor consequential amendments upon the introduction of Tax Law Improvement Project rewrites of other provisions. 63 of 1998 The amendments were minor consequential amendments resulting from changes to the Corporations Law. 24

25 Buy backs of shares and non share equity interests New Business Tax System (Debt and Equity) Act 2001 Tax Laws Amendment (2004 Measures No 6) Act 2005 Tax Laws Amendment (Loss Recoupment and Other Measures) Act of 2001 The amendments were consequential upon the introduction of the debt/equity rules and extended the scope of the buy-back provisions to cover non-share equity interests. 23 of 2005 The amendments were minor consequential amendments resulting from the introduction of the simplified imputation system. 147 of 2005 The amendments were minor consequential amendments resulting from the introduction of the conduit foreign income rules. Finding tables 1.94 The amendments substantially rewrite Division 16K of Part III of the ITAA These finding tables help locate which provision in the Bill corresponds to a provision in the current law that has been rewritten, and vice versa References to the old law in the finding table are to provisions in Division 16K of Part III of the ITAA 1936, unless otherwise stated References to the new law are to provisions in Division 190 of the ITAA Also, in the finding tables: No equivalent means that this is a new provision that has no equivalent in the current law. These reflect changes to implement the recommendations of the Board of Taxation. Omitted means that the provision in the old law has not been rewritten in the new law. 25

26 Tax Laws Amendment (2011 Measures No. 9) Bill 2011 Table 1.1 Old law to new law Old law New law 159GZZZIA , GZZZJ , GZZZK , GZZZL Omitted 159GZZZM GZZZN , GZZZP GZZZQ , , , GZZZR GZZZS Table 1.2 New law to old law New law No equivalent Old law GZZZP, 159GZZZM GZZZIA, 159GZZZJ, 159GZZZK No equivalent No equivalent GZZZQ(1) GZZZQ(3) to (7) No equivalent GZZZQ(2) GZZZQ(8) and (9) GZZZN (c) of the ITAA No equivalent No equivalent GZZZR GZZZIA, 159GZZZJ, 159GZZZK GZZZS GZZZN of the ITAA

27 Buy backs of shares and non share equity interests 27

This paper is a guide as to how the broad principles recommended by the Board of Taxation might operate.

This paper is a guide as to how the broad principles recommended by the Board of Taxation might operate. TREASURY DISCUSSION PAPER TAXATION TREATMENT OF OFF-MARKET SHARE BUYBACKS NOTE TO PARTICIPANTS This paper is a guide as to how the broad principles recommended by the Board of Taxation might operate. INTRODUCTION

More information

4.1 General 4.2 Draft taxation determination TD2004/D1

4.1 General 4.2 Draft taxation determination TD2004/D1 4.1 General The following comments: are a general guide to the Australian taxation implications of selling your Shares in the Buy-back; may not apply to you if you buy and sell Shares in the ordinary course

More information

You and your shares 2015

You and your shares 2015 Instructions for shareholders You and your shares 2015 For 1 July 2014 30 June 2015 Covers: n individuals who invest in shares or convertible notes n taxation of dividends from investments n allowable

More information

Intrepid Mines Limited: ATO Ruling Re Off-Market Buy-Back

Intrepid Mines Limited: ATO Ruling Re Off-Market Buy-Back 30 March 2015 Intrepid Mines Limited: ATO Ruling Re Off-Market Buy-Back Intrepid Mines Limited ASX : IAU Enquiries regarding this report may be directed to: Ravi Underwood Chief Financial Officer, Sydney,

More information

ATO CLASS RULING PUBLISHED

ATO CLASS RULING PUBLISHED 10 December 2014 ATO CLASS RULING PUBLISHED Syrah Resources Limited (ASX: SYR) advises that the Australian Taxation Office ( ATO ) has today published a final Class Ruling () in relation to the Company

More information

Review of the Taxation Treatment of Off-Market Share Buy Backs

Review of the Taxation Treatment of Off-Market Share Buy Backs PricewaterhouseCoopers ABN 52 780 433 757 The Board of Taxation C/- The Treasury Langton Crescent CANBERRA ACT 2600 Email: taxboard@treasury.gov.au Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY

More information

TAX AND SUPERANNUATION LAWS AMENDMENT (2014 MEASURES NO.#) BILL 2014: EXPLORATION DEVELOPMENT INCENTIVE EXPLANATORY MATERIAL

TAX AND SUPERANNUATION LAWS AMENDMENT (2014 MEASURES NO.#) BILL 2014: EXPLORATION DEVELOPMENT INCENTIVE EXPLANATORY MATERIAL TAX AND SUPERANNUATION LAWS AMENDMENT (2014 MEASURES NO.#) BILL 2014: EXPLORATION DEVELOPMENT INCENTIVE EXPLANATORY MATERIAL Table of contents Glossary... 1 Chapter 1 Exploration development incentive...

More information

Tax Summary 2012 & 2013. Chapter 16: Investments. Your plain English guide to tax. This document is an edited extract from:

Tax Summary 2012 & 2013. Chapter 16: Investments. Your plain English guide to tax. This document is an edited extract from: 2012 & 2013 Tax Summary Your plain English guide to tax This document is an edited extract from: Chapter 16: Investments This book is copyright. Apart from fair dealing for the purposes of private study,

More information

Accountant s Tax Guide

Accountant s Tax Guide Accountant s Tax Guide For the year ended 30 June 2010 Macquarie Wrap Macquarie Adviser Services Tax policies and general assumptions The purpose of the Accountants Tax Guide (the Guide) is to provide

More information

Simplified Imputation

Simplified Imputation July SA Bi-Monthly Simplified Imputation Helen Waldie Edwards Marshall Helen Waldie 2008 Disclaimer: The material in this presentation is published on the basis that the opinions expressed are not to be

More information

Franking account tax return and instructions 2013

Franking account tax return and instructions 2013 Instructions for companies Franking account tax return and instructions 2013 To help you complete the franking account tax return for 1 July 2012 30 June 2013 For more information go a.gov.au NAT 1382-6.2013

More information

What this Ruling is about

What this Ruling is about Page status: legally binding Page 1 of 12 Class Ruling Income tax: return of capital: Alliance Resources Limited Contents LEGALLY BINDING SECTION: Para What this Ruling is about 1 Date of effect 7 Scheme

More information

LIFE INSURANCE COMPANIES

LIFE INSURANCE COMPANIES CONSOLIDATION: LIFE INSURANCE COMPANIES MODIFICATION OF TAX COST SETTING RULES ON LEAVING A CONSOLIDATED GROUP PURPOSE 1. The special tax cost setting rules that apply to life insurance companies that

More information

Understanding Taxation Law 2012 by Gilders, Taylor, Walpole, Burton, Ciro

Understanding Taxation Law 2012 by Gilders, Taylor, Walpole, Burton, Ciro Understanding Taxation Law 2012 by Gilders, Taylor, Walpole, Burton, Ciro Suggested answers to Activities and Questions by John Taylor and updated by Amy Koit Chapter 13: Taxation of Shareholders 2012

More information

You and your shares 2013

You and your shares 2013 Instructions for shareholders You and your shares 2013 For 1 July 2012 30 June 2013 Covers: n individuals who invest in shares or convertible notes n taxation of dividends from investments n allowable

More information

REVIEW OF THE TAXATION TREATMENT OF OFF-MARKET SHARE BUYBACKS. Discussion Paper. boardtaxation. the. www.taxboard.gov.au

REVIEW OF THE TAXATION TREATMENT OF OFF-MARKET SHARE BUYBACKS. Discussion Paper. boardtaxation. the. www.taxboard.gov.au REVIEW OF THE TAXATION TREATMENT OF OFF-MARKET SHARE BUYBACKS Discussion Paper boardtaxation the of www.taxboard.gov.au The Board of Taxation JULY 2007 Review of the Taxation Treatment of Off-Market Share

More information

Wrap Tax Guide Self Managed Super Fund Part 1

Wrap Tax Guide Self Managed Super Fund Part 1 Wrap Tax Guide Self Managed Super Fund Part 1 Wrap Tax Policy Guide For the year ended 30 June 2015 General Information Part 1 of the Wrap Tax Guide outlines the tax assumptions and policies Wrap Services

More information

The following abbreviations and acronyms are used throughout this explanatory memorandum.

The following abbreviations and acronyms are used throughout this explanatory memorandum. Glossary The following abbreviations and acronyms are used throughout this explanatory memorandum. Abbreviation Definition ADI Authorised Deposit-taking Institution CGT Capital gains tax ITAA 1997 Income

More information

Company law tax changes

Company law tax changes Company law tax changes IRD Tax Information Bulletin: Volume Six, No.6 - Company Law Reform (December 994) Introduction The tax changes made in Part of the Income Tax Amendment Act have been enacted to

More information

Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 No., 2015

Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 No., 2015 2013-2014-2015 The Parliament of the Commonwealth of Australia HOUSE OF REPRESENTATIVES Presented and read a first time Tax and Superannuation Laws Amendment (Employee Share Schemes) No., 2015 (Treasury)

More information

Bills Digest No. 68 2001 02

Bills Digest No. 68 2001 02 Department of the Parliamentary Library IN FORM ATION AND R ESEARCH S ERVICES Bills Digest No. 68 2001 02 New Business Tax System (Debt and Equity) Bill 2001 ISSN 1328-8091 Copyright Commonwealth of Australia

More information

LOAN ACCOUNT ISSUES. for Companies Trusts & Individuals Presented by: Paul Holman Partner McLachlan Hodge Mitchell 24/04/2003 1

LOAN ACCOUNT ISSUES. for Companies Trusts & Individuals Presented by: Paul Holman Partner McLachlan Hodge Mitchell 24/04/2003 1 LOAN ACCOUNT ISSUES for Companies Trusts & Individuals Presented by: Paul Holman Partner McLachlan Hodge Mitchell 24/04/2003 1 Copyright notice The Taxation Institute of Australia website and all the content

More information

Capital Return ATO Class Ruling received

Capital Return ATO Class Ruling received ABN 47 116 648 956 ASX Announcement 5 December 2012 Capital Return ATO Class Ruling received Chalice Gold Mines Limited (ASX: CHN/TSX: CXN) advises that the Australian Taxation Office ( ATO ) has today

More information

INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I OF THE INCOME TAX ACT, 1962 (the Act)

INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I OF THE INCOME TAX ACT, 1962 (the Act) REPUBLIC OF SOUTH AFRICA SOUTH AFRICAN REVENUE SERVICE PRACTICE NOTE : NO. 4 DATE : 8 MARCH 1999 INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I

More information

Company tax return instructions 2015

Company tax return instructions 2015 Instructions for companies Company tax return instructions 2015 To help you complete the company tax return for 1 July 2014 30 June 2015 For more information visit ato.gov.au NAT 0669-06.2015 OUR COMMITMENT

More information

Australian Dividend Withholding Tax

Australian Dividend Withholding Tax Revenue Law Journal Volume 18 Issue 1 Article 4 December 2008 Australian Dividend Withholding Tax Glen A. Barton Follow this and additional works at: http://epublications.bond.edu.au/rlj Recommended Citation

More information

TAXATION STATEMENT GUIDE 2015

TAXATION STATEMENT GUIDE 2015 INFIGEN ENERGY TAXATION STATEMENT GUIDE 2015 Infigen Energy comprises the following: Infigen Energy Limited (ABN 39 105 051 616) Infigen Energy (Bermuda) Limited (ARBN 116 360 715) Infigen Energy Trust

More information

Chapter # Improving fairness and integrity in the tax system tightening the non-commercial loan rules

Chapter # Improving fairness and integrity in the tax system tightening the non-commercial loan rules Chapter # Improving fairness and integrity in the tax system tightening the non-commercial loan rules Outline of chapter 1.1 Schedule # amends the non-commercial loan rules in Division 7A of the Income

More information

2008-2009 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES

2008-2009 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES 2008-2009 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES EXPOSURE DRAFT: TAX LAWS AMENDMENT (2009 BUDGET MEASURES No. 2) BILL 2009 EXPOSURE DRAFT: INCOME TAX (TFN WITHHOLDING

More information

Company tax return instructions 2014

Company tax return instructions 2014 Instructions for companies Company tax return instructions 2014 To help you complete the company tax return for 1 July 2013 30 June 2014 For more information visit ato.gov.au NAT 0669-06.2014 OUR COMMITMENT

More information

PART 2-25 TRADING STOCK Division 70 Trading stock. Guide to Division 70

PART 2-25 TRADING STOCK Division 70 Trading stock. Guide to Division 70 Div 70 Trading stock Sec 70-10 Subdiv 70-A What is trading stock SECTION 70-1 PART 2-25 TRADING STOCK Division 70 Trading stock Guide to Division 70 What this Division is about This Division deals with

More information

Maintaining the Momentum of Business TAX REFORM

Maintaining the Momentum of Business TAX REFORM Maintaining the Momentum of Business TAX REFORM Senator The Hon Helen Coonan Minister For Revenue & the Assistant Treasurer 1 Maintaining the Momentum of Business Tax Reform The Minister for Revenue and

More information

Non-final withholding tax on transactions involving taxable Australian property

Non-final withholding tax on transactions involving taxable Australian property Non-final withholding tax on transactions involving taxable Australian property Discussion Paper October 2014 Commonwealth of Australia 2014 ISBN 978-1-925220-16-2 This publication is available for your

More information

Submission to the Treasury of the Australian Government

Submission to the Treasury of the Australian Government Submission to the Treasury of the Australian Government Exposure Draft - Managed Investment Trusts: Capital Account Treatment Karen Payne +61 2 9921 8719 karen.payne@minterellison.com Peter Capodistrias

More information

Financial planning fees - income tax

Financial planning fees - income tax Financial planning fees - income tax deductibility Summary Issues Background Legislation Types of investor Summary All references are to the Income Tax Act 1994 unless otherwise stated. This interpretation

More information

represents 70 percent of the Federal Government

represents 70 percent of the Federal Government GENERAL TAX ISSUES Income tax represents approximately 70 percent of the total tax revenue of the Australian Federal Government Income tax represents approximately 70 percent of the total tax revenue of

More information

TAXATION OF INTEREST, DIVIDENDS AND CAPITAL GAINS IN CYPRUS

TAXATION OF INTEREST, DIVIDENDS AND CAPITAL GAINS IN CYPRUS TAXATION OF INTEREST, DIVIDENDS AND CAPITAL GAINS IN CYPRUS LAWS AND DECREES The Income Tax (Amendment) Law of 2005 The Special Contribution for Defence (Amendment) Law of 2004 The Assessment and Collection

More information

Product Ruling Income tax: tax consequences of investing in ANZ Cobalt. No guarantee of commercial success. Terms of use of this Product Ruling

Product Ruling Income tax: tax consequences of investing in ANZ Cobalt. No guarantee of commercial success. Terms of use of this Product Ruling Page status: legally binding Page 1 of 30 Product Ruling Income tax: tax consequences of investing in ANZ Cobalt Contents LEGALLY BINDING SECTION: Para What this Ruling is about 1 This publication provides

More information

to taxation Australian 2005, and The discussions below

to taxation Australian 2005, and The discussions below General Tax Information Relating to Holdings in Cadbury plc and Cadbury Schweppes plc This discussion of Australian, UK and US tax law considerations is intended only as a descriptive summary and does

More information

OnCard International Limited ACN 084 800 902 NOTICE OF GENERAL MEETING TO BE HELD ON MONDAY 25 MAY 2015. and

OnCard International Limited ACN 084 800 902 NOTICE OF GENERAL MEETING TO BE HELD ON MONDAY 25 MAY 2015. and OnCard International Limited ACN 084 800 902 NOTICE OF GENERAL MEETING TO BE HELD ON MONDAY 25 MAY 2015 and Explanatory statement for the notice of general meeting Notice of the general meeting to be held

More information

Global Value Fund Limited A.B.N. 90 168 653 521. Appendix 4E - Preliminary Financial Report for the year ended 30 June 2015

Global Value Fund Limited A.B.N. 90 168 653 521. Appendix 4E - Preliminary Financial Report for the year ended 30 June 2015 A.B.N. 90 168 653 521 Appendix 4E - Preliminary Financial Report for the year ended 30 June 2015 Appendix 4E - Preliminary Financial Report For the year ended 30 June 2015 Preliminary Report This preliminary

More information

Company Income Tax and Other Taxes

Company Income Tax and Other Taxes Company Income Tax and Other Taxes Company Taxation Arrangements The company tax rate (also known as the corporate) is 30%. The treatment of business expenditure for the mining and petroleum industries

More information

Chapter 2. The Temporary Budget Repair Levy

Chapter 2. The Temporary Budget Repair Levy Chapter 2 The Temporary Budget Repair Levy 2.1 This chapter discusses the legislation introduced by the package of Temporary Budget Repair Levy (the Levy) bills. 2.2 The committee first gives a brief overview

More information

Taxation Treatment of Futures

Taxation Treatment of Futures Taxation Treatment of Futures October 2003 Any queries regarding this paper can be directed to Patrick Broughan, Taxation Partner Ernst & Young, Melbourne on (03) 9288 8830 IMPORTANT DISCLAIMER Ernst &

More information

Advanced guide to capital gains tax concessions for small business 2012 13

Advanced guide to capital gains tax concessions for small business 2012 13 Guide for small business operators Advanced guide to capital gains tax concessions for small business 2012 13 For more information visit ato.gov.au NAT 3359 06.2013 OUR COMMITMENT TO YOU We are committed

More information

Australia Tax Alert. Budget 2013-14 targets debt funding by multinationals. Thin capitalization rules. International Tax. 15 May 2013.

Australia Tax Alert. Budget 2013-14 targets debt funding by multinationals. Thin capitalization rules. International Tax. 15 May 2013. International Tax Australia Tax Alert Contacts Peter Madden pmadden@deloitte.com.au Claudio Cimetta ccimetta@deloitte.com.au Vik Khanna vkhanna@deloitte.com.au Alyson Rodi arodi@deloitte.com.au David Watkins

More information

THE TAX INSTITUTE. Tax Rates Table 2013-14

THE TAX INSTITUTE. Tax Rates Table 2013-14 THE TAX INSTITUTE Tax Rates Table 2013-14 taxinstitute.com.au Individual income tax rates Residents 2012-13 2013-14 Taxable income Marginal rate Tax on this income $0 $18,200 Nil Nil $18,201 $37,000 19%

More information

Hong Kong. Country M&A Team Country Leader ~ Nick Dignan Guy Ellis Rod Houng-Lee Anthony Tong Sandy Fung Greg James Louise Leung Nicholas Lui

Hong Kong. Country M&A Team Country Leader ~ Nick Dignan Guy Ellis Rod Houng-Lee Anthony Tong Sandy Fung Greg James Louise Leung Nicholas Lui Hong Kong Country M&A Team Country Leader ~ Nick Dignan Guy Ellis Rod Houng-Lee Anthony Tong Sandy Fung Greg James Louise Leung Nicholas Lui Mergers & Acquisitions Asian Taxation Guide 2008 Hong Kong March

More information

Division 7A Checklist 2010

Division 7A Checklist 2010 Division 7A Checklist 2010 The following checklist will assist you to determine whether Division 7A applies. To be completed by all private companies each year. A1. Does the private company have a Distributable

More information

Accounting Standard AASB 1020 December 1999. Income Taxes. Issued by the Australian Accounting Standards Board

Accounting Standard AASB 1020 December 1999. Income Taxes. Issued by the Australian Accounting Standards Board Accounting Standard AASB 1020 December 1999 Income Taxes Issued by the Australian Accounting Standards Board Obtaining a Copy of this Accounting Standard Copies of this Standard are available for purchase

More information

Post implementation review into certain aspects of the consolidation regime. Discussion Paper. boardtaxation. the of. www.taxboard.gov.

Post implementation review into certain aspects of the consolidation regime. Discussion Paper. boardtaxation. the of. www.taxboard.gov. Post implementation review into certain aspects of the consolidation regime Discussion Paper boardtaxation the of www.taxboard.gov.au The Board of Taxation December 2009 Commonwealth of Australia 2009

More information

Tax Brief. 19 March 2010. Consolidating Consolidation. Tax cost setting amount for rights to future income and revenue assets. Rights to future income

Tax Brief. 19 March 2010. Consolidating Consolidation. Tax cost setting amount for rights to future income and revenue assets. Rights to future income Tax Brief 19 March 2010 Consolidating Consolidation The Tax Laws Amendment (2010 Measures No. 1) Bill 2010 ( the Bill ) was introduced into Parliament on 10 February 2010. Schedule 5 of the Bill contains

More information

Tax Brief. 9 April, 2009. Debt for Equity Swaps. 1. Introduction. 2. Income tax issues for the creditor

Tax Brief. 9 April, 2009. Debt for Equity Swaps. 1. Introduction. 2. Income tax issues for the creditor Tax Brief 9 April, 2009 Debt for Equity Swaps 1. Introduction It may be possible to find a silver lining in the cloud of economic woes being experienced by many struggling businesses unable to meet their

More information

Off-market Buy-Back booklet

Off-market Buy-Back booklet This Buy-Back is not available to persons in, and this document is not to be distributed into, the United States of America or Canada BHP BILLITON LIMITED ABN 49 004 028 077 Off-market Buy-Back booklet

More information

Improving the tax treatment of bad debts in related party financing

Improving the tax treatment of bad debts in related party financing Improving the tax treatment of bad debts in related party financing Discussion paper July 2012 Commonwealth of Australia 2012 ISBN 978 0 642 74837 9 This publication is available for your use under a Creative

More information

New Zealand. Country M&A Team Country Leader ~ Peter Boyce Declan Mordaunt Mike Morgan Eleanor Ward Ian Fay Michelle Redington Ravi Mehta

New Zealand. Country M&A Team Country Leader ~ Peter Boyce Declan Mordaunt Mike Morgan Eleanor Ward Ian Fay Michelle Redington Ravi Mehta New Zealand Country M&A Team Country Leader ~ Peter Boyce Declan Mordaunt Mike Morgan Eleanor Ward Ian Fay Michelle Redington Ravi Mehta Mergers & Acquisitions Asian Taxation Guide 2008 New Zealand March

More information

Introduction to Taxation

Introduction to Taxation Introduction to Taxation Taxes are the price we pay for a civilized society. - Oliver Wendell Holmes, Jr. Taxation is a financial charge imposed on people. Taxation is a means whereby the state collects

More information

Australia. Mergers & Acquisitions Asian Taxation Guide 2008 Australia March 2008 PricewaterhouseCoopers 1

Australia. Mergers & Acquisitions Asian Taxation Guide 2008 Australia March 2008 PricewaterhouseCoopers 1 Australia Country M&A Team Country Leader ~ Mark O Reilly (Sydney) Vanessa Crosland Anthony Klein Christian Holle David Pallier Michael Frazer Mike Davidson Norah Seddon Paul Abbey Peter Collins Peter

More information

Company Tax Return Preparation Checklist 2010

Company Tax Return Preparation Checklist 2010 Company Tax Return Preparation Checklist 2010 The following income tax return checklist should be completed in conjunction with the preparation of tax reconciliation return workpapers. The checklist provides

More information

2009 MMG Tax Statement Guide: Essential information to help you complete your 2009 Australian income tax return

2009 MMG Tax Statement Guide: Essential information to help you complete your 2009 Australian income tax return 2009 MMG Tax Statement Guide: Essential information to help you complete your 2009 Australian income tax return MACQUARIE MEDIA GROUP Registered trademark of Macquarie Group Limited Disclaimer The information

More information

Murray Goulburn Co-operative Co. Limited. C Class Preference Shares - Buy-back Offer Document

Murray Goulburn Co-operative Co. Limited. C Class Preference Shares - Buy-back Offer Document Murray Goulburn Co-operative Co. Limited C Class Preference Shares - Buy-back Offer Document C Class Preference Shares Buy-back Offer Document This is an important document and requires your immediate

More information

Year-end tax planning toolkit. Year-ending 30 June 2014

Year-end tax planning toolkit. Year-ending 30 June 2014 Year-end tax planning toolkit Year-ending 30 June 2014 June 2014 The contents of this document are for general information only and do not consider your personal circumstances or situation. Furthermore,

More information

Taxation treatment of Exchange Traded Options

Taxation treatment of Exchange Traded Options Taxation treatment of Exchange Traded Options 18 May 2011 Patrick Broughan, Director, Deloitte Touche Tohmatsu Ltd Alison Noble, Account Director, Deloitte Touche Tohmatsu Ltd The views in this document

More information

Unification of corporation tax rates: consequential changes

Unification of corporation tax rates: consequential changes Unification of corporation tax rates: consequential changes Who is likely to be affected? Companies with small profits that are associated with other companies. General description of the measure This

More information

TAX LAWS AMENDMENT (TAX INTEGRITY MULTINATIONAL ANTI-AVOIDANCE LAW) BILL 2015 EXPOSURE DRAFT EXPLANATORY MATERIAL

TAX LAWS AMENDMENT (TAX INTEGRITY MULTINATIONAL ANTI-AVOIDANCE LAW) BILL 2015 EXPOSURE DRAFT EXPLANATORY MATERIAL TAX LAWS AMENDMENT (TAX INTEGRITY MULTINATIONAL ANTI-AVOIDANCE LAW) BILL 2015 EXPOSURE DRAFT EXPLANATORY MATERIAL Table of contents Glossary... 1 Tax integrity multinational anti-avoidance law... 3 Glossary

More information

Draft Examples Clause 33: Hybrid and other mismatches

Draft Examples Clause 33: Hybrid and other mismatches Draft Examples Clause 33: Hybrid and other mismatches The following draft examples are provided to assist understanding of the application of the draft hybrids mismatch legislation published on 9 December

More information

IRAS e-tax Guide. Group Relief System

IRAS e-tax Guide. Group Relief System IRAS e-tax Guide Group Relief System Published by Inland Revenue Authority of Singapore Published on 6 Sep 2011 Disclaimers: IRAS shall not be responsible or held accountable in any way for any damage,

More information

Chapter 7. Changes in capital and new issues

Chapter 7. Changes in capital and new issues Table of Contents Chapter 7 The main headings in this chapter Rules New issues 7.1 7.9 No interference etc with issue of + securities 7.10 Rules that apply to all + pro rata issues 7.11 Rules that apply

More information

As a general rule, Australian dollar amounts in the calculation of a taxpayer s

As a general rule, Australian dollar amounts in the calculation of a taxpayer s FOREIGN CURRENCY GAINS AND LOSSES 1 The Recognition of Foreign Currency Gains and Losses in Australian Income Tax Law GA BARTON * The Australian income tax implications of deriving a foreign currency gain

More information

Amendments to the Tax Treatment of Financing Costs and Income (Debt Cap)

Amendments to the Tax Treatment of Financing Costs and Income (Debt Cap) Amendments to the Tax Treatment of Financing Costs and Income (Debt Cap) Who is likely to be affected? Large groups of companies that are subject to the debt cap. General description of the measure This

More information

Division 7A Checklist 2011

Division 7A Checklist 2011 Division 7A Checklist 2011 The following checklist, prepared by Moore Stephens on behalf of CPA Australia, will assist you to determine whether Division 7A applies. To be completed by all private companies

More information

An Act to re-enact and modernise the law relating to payroll tax; to harmonise payroll tax law with other States; and for other purposes.

An Act to re-enact and modernise the law relating to payroll tax; to harmonise payroll tax law with other States; and for other purposes. Version: 1.7.2013 South Australia Payroll Tax Act 2009 An Act to re-enact and modernise the law relating to payroll tax; to harmonise payroll tax law with other States; and for other purposes. Contents

More information

GUIDE TO YOUR ANNUAL TAX STATEMENT July 2015

GUIDE TO YOUR ANNUAL TAX STATEMENT July 2015 Perpetual Investments GUIDE TO YOUR ANNUAL TAX STATEMENT July 2015 TO HELP YOU UNDERSTAND YOUR ANNUAL TAX STATEMENT AND COMPLETE YOUR TAX RETURN FOR THE 2014/2015 FINANCIAL YEAR HOW TO USE THIS GUIDE This

More information

Advanced guide to capital gains tax concessions for small business 2013 14

Advanced guide to capital gains tax concessions for small business 2013 14 Guide for small business operators Advanced guide to capital gains tax concessions for small business 2013 14 For more information visit ato.gov.au NAT 3359 06.2014 OUR COMMITMENT TO YOU We are committed

More information

CONTENTS. Vol 23 No 1 February 2011. 1 In summary

CONTENTS. Vol 23 No 1 February 2011. 1 In summary Vol 23 No 1 February 2011 CONTENTS 1 In summary 4 Binding rulings Public rulings BR Pub 10/01 10/05: Australian Limited Partnerships Public ruling BR Pub 10/21: Interest repayments required as a result

More information

Year end tax planning 2016 For businesses and investors

Year end tax planning 2016 For businesses and investors Year end tax planning 2016 For businesses and investors What s important in 2015/16? Reduction to company tax rate for small business companies from 1 July 2015. From 1 July 2015, the income tax rate of

More information

Company tax return 2015

Company tax return 2015 Company tax return 2015 Day Month Year Day Month Year to Or specify period if part year or approved substitute period tes to help you prepare this tax return are in the Company tax return instructions

More information

NZ Society of Actuaries. Conference. Wairakei - November 2008 Anthony Merritt

NZ Society of Actuaries. Conference. Wairakei - November 2008 Anthony Merritt LIFE INSURANCE TAX REFORM Life NZ Insurance Society of Actuaries Tax Conference Reform Wairakei NZ Society of Actuaries Conference November 2008 Wairakei - November 2008 Anthony Merritt Policy Advice Anthony

More information

Company Purchase of Own Shares Help Sheet

Company Purchase of Own Shares Help Sheet Most payments made by a company to its shareholders in respect of their shares will be qualifying distributions and may be subject to Income Tax. This help sheet provides information to help you understand,

More information

HKAS 12 Revised May November 2014. Hong Kong Accounting Standard 12. Income Taxes

HKAS 12 Revised May November 2014. Hong Kong Accounting Standard 12. Income Taxes HKAS 12 Revised May November 2014 Hong Kong Accounting Standard 12 Income Taxes HKAS 12 COPYRIGHT Copyright 2014 Hong Kong Institute of Certified Public Accountants This Hong Kong Financial Reporting Standard

More information

GUIDE TO CAPITAL GAINS TAX 2002 03

GUIDE TO CAPITAL GAINS TAX 2002 03 GUIDE TO CAPITAL GAINS TAX 2002 03 Covers: Individuals who have sold their main residence Individuals with complex capital gains tax obligations Companies, trusts and funds Lodge online with e-tax at www.ato.gov.au

More information

The Australian dollar versus the US dollar. Disclaimer. Foreign currency denominated transactions. Example Foreign Exchange Gain

The Australian dollar versus the US dollar. Disclaimer. Foreign currency denominated transactions. Example Foreign Exchange Gain Walter Gianotti and Erin Gordon, ATO 2009 Lost in Translation: Foreign Exchange Gains and Losses Disclaimer: The material in this presentation is published on the basis that the opinions expressed are

More information

SUNCORP GROUP LIMITED

SUNCORP GROUP LIMITED SUNCORP GROUP LIMITED ABN 66 145 290 124 EXEMPT EMPLOYEE SHARE PLAN TRUST DEED 5709273/1 TABLE OF CONTENTS 1. PURPOSE... 1 2. DEFINITIONS... 1 3. OPERATION OF THE PLAN... 4 4. HOW THE PLAN WORKS... 4 5.

More information

Tax Guide 2006. A guide to completing your tax return for your ING DIRECT Managed Investments

Tax Guide 2006. A guide to completing your tax return for your ING DIRECT Managed Investments Tax Guide 2006 A guide to completing your tax return for your ING DIRECT Managed Investments Getting Started TAX GUIDE 2002 Guide to completing your tax return Important Information We have prepared this

More information

Company tax return instructions 2013

Company tax return instructions 2013 Instructions for companies Company tax return instructions 2013 To help you complete the company tax return for 1 July 2012 30 June 2013 For more information visit ato.gov.au NAT 0669-06.2013 OUR COMMITMENT

More information

Taxation of Cross-Border Mergers and Acquisitions

Taxation of Cross-Border Mergers and Acquisitions KPMG INTERNATIONAL Taxation of Cross-Border Mergers and Acquisitions Australia kpmg.com 2 Australia: Taxation of Cross-Border Mergers and Acquisitions Australia Introduction The Australian tax system is

More information

DIVIDEND REINVESTMENT PLAN

DIVIDEND REINVESTMENT PLAN www.brambles.com DIVIDEND REINVESTMENT PLAN KEY FEATURES OF THE BRAMBLES DIVIDEND REINVESTMENT PLAN Gives you flexibility to apply some or all of your dividends to the purchase of shares rather than cash.

More information

NG Payments for foreign dividends

NG Payments for foreign dividends 166 NG Payments for foreign dividends Contents Introductory provisions NG 1 NG 2 FDP rules and their application Foreign dividends Obligation to make payments NG 3 Obligation to make payments for foreign

More information

Tax insights New Tax System for Managed Investment Trusts - Exposure Draft

Tax insights New Tax System for Managed Investment Trusts - Exposure Draft 20 April 2015 2015/6 Tax insights New Tax System for Managed Investment Trusts - Exposure Draft Snapshot On 9 April 2015 the government released Tax Laws Amendment (New Tax System for Managed Investment

More information

Taxation treatment of exchange traded futures

Taxation treatment of exchange traded futures Taxation treatment of exchange traded futures 20 May 2010 Alison Noble, Principal, Deloitte Touche Tohmatsu Ltd Christopher Neil, Analyst, Deloitte Touche Tohmatsu Ltd The views in this document are those

More information

ANZ Online Investment Account

ANZ Online Investment Account ANZ Online Investment Account Product Disclosure Statement 30 MARCH 2012 Important information This Product Disclosure Statement (PDS) describes a convenient and simple way to invest in the performance

More information

Appendix 4D. 31 December 2011 Half Yearly Report

Appendix 4D. 31 December 2011 Half Yearly Report Appendix 4D 31 December 2011 Half Yearly Report CARLTON INVESTMENTS LIMITED ABN 000 020 262 1. Financial Reporting Period The current financial reporting period is for the half year to 31 December 2011

More information

Lifeplan NextGen Investments

Lifeplan NextGen Investments Lifeplan NextGen Investments Essential Guide to Investment Bonds Adviser Use Only Everything you wanted to know about Lifeplan NextGen Investments. March 2014. Is the PDS FoFA compliant? The Lifeplan NextGen

More information

Taxation treatment of Exchangetraded Australian Government Bonds

Taxation treatment of Exchangetraded Australian Government Bonds Taxation treatment of Exchangetraded Australian Government Bonds 27 March 2013 This document is provided as general information only and does not consider anyone s specific objectives, situation or needs.

More information

TH6 Planning for and maximising the CGT small business concessions and audit implications

TH6 Planning for and maximising the CGT small business concessions and audit implications TH6 Planning for and maximising the CGT small business concessions and audit implications James McPhedran Senior Tax and Superannuation Trainer Chartered Accountants Australia and New Zealand Sharlene

More information

Class Ruling Income tax: Westfield Trust Westfield Group merger stapling arrangement. What this Class Ruling is about

Class Ruling Income tax: Westfield Trust Westfield Group merger stapling arrangement. What this Class Ruling is about FOI status: may be released Page 1 of 13 Class Ruling Income tax: Westfield Trust Westfield Group merger stapling arrangement Contents Para What this Class Ruling is about 1 Date of effect 8 Withdrawal

More information

EXPLANATORY NOTES ON THE CRITICAL TAX ISSUES FOR THE OPERATION OF BANK HOLDING COMPANY STRUCTURE IN NIGERIA

EXPLANATORY NOTES ON THE CRITICAL TAX ISSUES FOR THE OPERATION OF BANK HOLDING COMPANY STRUCTURE IN NIGERIA NIGERIA INFORMATION CIRCULAR Published: April, 2012 Subject: EXPLANATORY NOTES ON THE CRITICAL TAX ISSUES FOR THE OPERATION OF BANK HOLDING COMPANY STRUCTURE IN NIGERIA This circular is made to address

More information

Check List Tax Planning 2012

Check List Tax Planning 2012 Check List Tax Planning 2012 Deferring Assessable Income Yes No N/A Application of Arthur Murray Principle to receipts Review contracts for the provision of services to determine whether income from such

More information

April update focusses on matters affecting individuals

April update focusses on matters affecting individuals April update focusses on matters affecting individuals UPDATE SNAPSHOT Medicare Levy Surcharge and Private Health Insurance Rebate Net Medical Expenses Tax Offset Superannuation guarantee rate Super contributions

More information

Appendix 3. The metric

Appendix 3. The metric Appendix 3 A consistent and useful effective tax rate methodology to assess the global tax performance of multinationals in relation to Australian-linked business operations 1 The purpose of this paper

More information