In November last year, the ATO invited SMSF trustees who may have used a dividend-stripping arrangement similar to those described in Taxpayer Alert TA 2015/1 to contact the ATO to correct the tax position resulting from such arrangements.
Speaking at the CPA National SMSF Conference, ATO deputy commissioner of superannuation James O’Halloran said this offer has already resulted in the unwinding of 17 arrangements, with the repayment of $3 million in incorrectly claimed franking credits.
“We believe it has also prevented the future payments of some $2.7 million [in] franking credit refunds from 2015 onwards,” said Mr O’Halloran.
“So people have come forward and on an individual scale they’ve been quite significant voluntary disclosures, and I think, certainly in the sense of a balancing of principles, we also believe it has been productive.”
Mr O’Halloran said the offer has also been a warning to individuals regarding some of the breaches that arise from dividend stripping.
“These arrangements concern us as they are intended to shield any dividend income at a low level or zero rate, rather than the top tax rate, and the fund being entitled to a direct refund of the franking credits,” he said.
In his presentation, Mr O’Halloran also announced that the ATO will be releasing a law companion guideline, which will include the tax office’s public rulings and provide its view of the law and how it applies.
“These guidelines will be in development at the same time as the drafting of proposed bills, so in this instance we anticipate that the law companion guide will be published in draft form for comment when the bills are introduced into Parliament, and will be finalised after the legislative bills receive royal assent,” he said.
“It won’t cover everything, but as we work it up we hope it will provide early certainty in relation to the application of the law, and once [the guidelines are] concluded they will have the standing of public rulings.”
