ATO ID 2002/602: The 45-day holding period rule - scrip for scrip takeover
Date of decision: 12 March 2002
Business line: Private Groups and High Wealth Individuals

Issue
Does section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) apply to imputation credits attached to dividends received by the taxpayer for shares acquired in a scrip for scrip takeover?

Decision
Yes, section 160APHO of the ITAA 1936 does apply to imputation credits attached to dividends received by the taxpayer for shares acquired in a scrip for scrip takeover.

Facts
The taxpayer purchased shares in a company prior to 1 July 1997. The company was taken over by another company after 1 July 1997. The shares held in the original company were ordinary shares. The takeover company issued ordinary shares, after 1 July 1997, to shareholders on a one-for-one basis to effect the takeover.

Reasons for decision
Summary: Division 1A of Part IIIAA of the ITAA 1936 determines when a taxpayer will qualify for franking credits in respect of dividends derived. There is no specific provision within that Division that deems the acquisition date of shares in a scrip-for-scrip takeover to be the date of purchase of the original shares. The requirements of Section 160APHO of the ITAA 1936 will therefore apply to the imputation credits attached to dividends received for shares in the takeover company issued in place of the original shares.

Legislative references: Income Tax Assessment Act 1936 section 160APHO
Related ATO interpretative decisions: ATO ID 2002/603 | ATO ID 2003/1105 | ATO ID 2003/1108
Subject references: Scrip dividends Imputation credits