ICAA issues warning on dividend washing
The Institute of Chartered Accountants (ICAA) has warned that both the Australian Taxation Office (ATO) and the Federal Treasurer, Joe Hockey, have signaled their intentions on so-called "dividend washing" by self-managed superannuation fund (SMSF) trustees.
The ICAA's head of tax policy, Michael Croker, referenced the ATO's draft determination TD 2014/D1 which he said indicated that Part IVA of the tax laws could be applied to 'dividend washing' arrangements which double-up the benefits of franking credit entitlements.
"There is a two-pronged attack at work here, aiming to stop sophisticated investors benefiting from the practice," he said. "The ATO is flagging Part IVA exposure, and the Treasurer has said he will implement the previous government's proposal to enact legislation back-dated to 1 July 2013."
Croker said it was also worth noting that the draft ATO ruling was proposing to apply both prospectively and retrospectively.
He noted that the draft ruling followed on from the ATO's October 2013 media release stating that dividend-washing trades were not allowable under the tax law and called on participants to make a voluntary disclosure in return for reduced penalties.
Croker said that some people argued that dividend washing was an opportunity brought about by Australian Securities Exchange (ASX) rules which allowed the trading of large cap stocks in a special market for two days cum-dividend after the stocks had gone ex-dividend in the normal market.
"But both the ATO and the government are determined to end the estimated $20 million in annual revenue loss from this particular arrangement," he said.
Originally published by SMSF Essentials.
Recommended for you
Data and technology provider Novigi has acquired Iress’ superannuation consulting and managed services business from Apex Group.
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
