Dividend stripping revealed: an analysis of Lawrence's case

Dabner, Justin (2009) Dividend stripping revealed: an analysis of Lawrence's case. CCH Tax Week, 15 (2). pp. 1-5.

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A number of provisions scattered throughout the income tax legislation seek to deal with the evil of dividend stripping (primarily s 177E of ITAA 1936, s 207-145 and 207-150 of ITAA 1997). However nowhere in the legislation is there a definition of dividend stripping. This has been of concern to tax advisers because (in the absence of the availability of the CGT small business concessions) plain vanilla tax planning has traditionally favoured a shareholder who controls a private company with undistributed profits first stripping the profits out of the company by way of a dividend issue before selling the shares. Of course, it all depends on the tax profile of the company and the shareholder bur a scenario can be envisaged whereby the dividend would be tax free to the shareholder and any capital gain on the disposal of the shares minimised (or a loss generated). The more recent the acquisition of the company by the shareholder the greater the concern that the dividend stripping rules may have an application.

Item ID: 8867
Item Type: Article (Commentary)
Keywords: taxation; taxation law
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Date Deposited: 29 Apr 2010 03:02
FoR Codes: 18 LAW AND LEGAL STUDIES > 1801 Law > 180125 Taxation Law @ 100%
SEO Codes: 94 LAW, POLITICS AND COMMUNITY SERVICES > 9499 Other Law, Politics and Community Services > 949999 Law, Politics and Community Services not elsewhere classified @ 100%
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