Distribution clarity?

7 December 2011

In our recent Tax Brief on distribution confusion we discussed two fact sheets that the ATO had circulated in draft dealing with the impact of the 2010 changes to the Corporations Act 2001 dividend rule in section 245T and the associated tax law change. Most concern revolved around the conclusion that a dividend which produced or increased negative retained earnings was assessable for tax purposes but unfrankable to the extent it represented negative retained earnings. The reasoning for this conclusion left us and many others scratching their heads in confusion.

Clarity may – emphasise may – be about to return with the release of a Discussion Paper by Treasury on further possible amendments to the Corporations Act and a communication from the ATO which seems to retract in part the conclusion in the draft fact sheets.

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These notes are in summary form designed to alert clients to tax developments of general interest. They are not comprehensive , they are not offered as advice and should not be used to formulate business or other fiscal decisions.

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