The 2016-17 MYEFO included two key tax changes. The first was around franked distributions funded by capital raisings.
The government has introduced a specific measure preventing the distribution of franking credits where a distribution to shareholders is funded by particular capital raising activities. The measure applies to distributions made after 12:00pm (AEDT) on December 19, 2016.
This measure will address the issues raised by the Australian Taxation Office in Taxpayer Alert TA 2015/2: Franked distributions funded by raising capital to release credits to shareholders.
It is estimated to have a gain to revenue of $30.0 million over the forward estimates period.
BDO tax partner, Mark Molesworth, said the measure essentially means that special dividends outside a company’s normal cycle which are funded directly or indirectly from capital raisings will be unfrankable.
Mr Molesworth said there are several obvious issues with this.
“What is the company’s normal cycle for private companies or those who have not historically paid dividends bi-annually - like blue chip public companies do?” he questioned.
“How do you prove that a capital raising did not indirectly fund the dividend? Why are the current anti-avoidance provisions insufficient?”
The second tax change is to improve the transparency of taxation debts.
The government will allow the ATO to disclose to Credit Reporting Bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts from July 1, 2017.
The measure will initially only apply to businesses with Australian Business Numbers and tax debt of more than $10,000 that is at least 90 days overdue.
The aim is to encourage businesses to pay taxation debts in a more timely manner to avoid affecting their credit rating.
Mr Molesworth said this demonstrates that the government and the ATO are becoming more serious about ensuring debts are collected in a timely manner.
The measure is estimated to have a gain to the budget of $63.0 million in underlying cash balance terms over the forward estimates period.