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Draft legislation – changes to taxation of certain off-market share buy-backs
Article published on: 18-11-2022
The Government has released draft legislation for consultation following the October Federal Budget announcement relating to the proposal to change the tax treatment of certain off-market share buy-backs.
This is considered a tax integrity measure to align the tax treatment of off-market share buybacks with on-market buy-backs by public listed companies.
Currently, a listed company may complete an off-market share buy-back and can treat part of the buy-back price as a dividend payment (which may also include franking credits).
his differs to an on-market buy-back, where the full purchase price is treated as a capital payment. In effect, by having the option to treat part of the buy-back price as a dividend payment, a favourable tax outcome may be achieved for the shareholder, particularly where franking credits are refundable to the taxpayer.
More information about the taxation of share buy-backs, including a worked example, can be found on ato.gov.au.
Commencement
It is proposed that the measure will commence on the first 1 January, 1 April, 1 July or 1 October after Royal Assent is received, and will apply to listed public company buy-backs first announced from 7:30pm (AEDT) on 25 October 2022 (Federal Budget night).
Submissions close on 9 December 2022 and legislation will then need to be formally passed before this measure becomes law. | |
