Western Districts Business Pty Ltd is a base rate entity (tax rate of 27.5%) and in May 2020 the company distributed dividends as follows: (i) all franked dividends were to go to shareholders who were either residents or pensioners or retirees; (ii) all unfranked dividends to go to other shareholders. Can the ATO challenge the distribution made in May 2020 under its anti-avoidance measures?

Question

Quizplus · Accepted Answer

This is an example of dividend streaming, where dividends are selectively distributed to shareholders in a way that could potentially advantage certain shareholders (e.g., those with lower tax rates) over others. The ATO can challenge such distributions under its anti-avoidance measures to ensure fair tax treatment.

Western Districts Business Pty Ltd Is a Base Rate Entity