ATO Warns Against Dividend Access Share Arrangements

Wednesday, October 24, 2012

This media release indicated that the Tax Office is reviewing arrangements whereby dividends are paid to different shareholders at different rates to utilise lower marginal tax rates of the different shareholders or their associates.

The media release focused on established companies issuing new share classes with dividend only rights to associates of the original shareholders for nominal consideration, and then implementing a dividend policy whereby the new shareholders receive the dividends and pay less tax than would have been paid by the original shareholders. The Tax Office is concerned that the dominant purpose of such arrangements is tax avoidanceand have indicated that such arrangements will be closely scrutinised, particularly with regards to the general anti-avoidance provisions.

If you are concerned that dividends declared by your company may fall under scrutiny by the Tax Office, please contact us to discuss your concerns.