Hi.
In the case where Company A owns shares in Company B and Company A distributes the Company B shares to Company A shareholders in specie, what are the tax implications for Company A shareholders?
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4 replies
Could be a dividend.
Could be a return of capital.
Proper advice is required for this.
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Could be a dividend.
Could be a return of capital.
Proper advice is required for this.
Thanks Bruce4Tax,
What circumstances would give rise to a dividend and what circumstances would give rise to a return of capital?
Is there a good place to get more information on this at the ATO website?
Hi @Ross571,
An in‑specie distribution of shares is still treated as a distribution to shareholders, even though no cash is received.
The tax treatment depends on what the distribution represents, for example:
- It may be treated as a dividend to the shareholders.
- The value of the shares received is used to work out the amount of that distribution.
If it’s a dividend:
- it may be assessable income
- franking may apply if the company has franking credits available.
Receiving shares can also have CGT implications:
- The shares you receive become a new CGT asset
- Their cost base is generally their market value at the time of the distribution.
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