On the 30th of April, the ATO issued a public ruling to confirm that it’s anti-avoidance legislation does apply to dividend washing arrangements. The ATO confirmed that anti-avoidance legislation has always applied to dividend washing arrangements and will continue to apply.
Dividend washing occurs when shareholders seek to claim two sets of franking credits on what is effectively the same parcel of shares. This occurs when an investor, who has access to the special market sells shares ex-dividend and then buys cum-dividend shares in the same company on the special market. The ruling states that the franking credit anti-avoidance rule will generally apply to a dividend washing arrangement to deny the ranking credit benefit on the second parcel of shares. This ruling follows the ATO‘s warning that such schemes are not allowable.
Recently, 3,000 letters were sent to taxpayers who may be involved in dividend washing arrangements and taxpayers are encouraged to self-amend their tax returns with no penalty being imposed. This offer is extended to taxpayers until 28 May 2014.
If you are involved in a tax avoidance scheme and this affects returns you’ve lodged in previous years, you can self-amend by calling 1800 177 006 to avoid penalty.
The ATO recommends those who are unsure about their own circumstances should seek independent advice or apply for a private ruling from the ATO. Please don’t hesitate to get in touch with us here at Fortis Accounting Partners if you do have any questions regarding dividend washing, or anything else regarding the ATO. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
