Why are share buy-backs not subject to tax imputation?
A) It is not a dividend. Share buy-backs can be subject to Capital Gains Tax.
B) Because it is optional whether or not to sell your shares in a share-buy back.
C) Because the money used to purchase shares through share buy-backs are not from company profits.
D) None of the above.

Question

Quizplus · Accepted Answer

Share buy-backs are taxed differently to dividends. As we saw in the discussion earlier, the total value of dividends is effectively taxed at an investors' marginal personal tax rate under the imputation tax system. In contrast, when a shareholder sells shares back to the company, the shareholder may incur capital gains tax.

Why Are Share Buy-Backs Not Subject to Tax Imputation