Private ruling: Commissioner's discretion under subsection 103A(5) for public company status
Date of advice: 1 June 2016
Published: July 2016
Ruling period: Income Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Would the Commissioner exercise his discretion under subsection 103A(5) of the ITAA 1936 to deem Company to be a public company for the income year ended 30 June 2016 if it breaches any of the tests in section 103A(3) of the ITAA 1936 at a time in the year ended 30 June 2016? | A1: Yes

Relevant facts and circumstances: The Company is incorporated in Australia and a tax resident of Australia. The Company is listed on the ASX and it is assumed will remain so for the whole of the year of income ended 30 June 2016. The Company has only one class of ordinary shares on issue and each carry the same voting and dividend rights. The constituent documents of the Company do not allow for, and there are no contractual arrangements (agreements, options, etc.) in place that would permit the variation or abrogation of voting rights or rights to dividends in respect of any shares in the Company, or that relate to the conversion, exchange or redemption of any such shares in the Company, to enable less than 20 persons to exercise 75% or more of the voting power in the company or have an entitlement to 75% of the dividends paid by the Company during a year of income. The market capitalisation of the company is around $700m. The issued (contributed) capital of the Company is around $300m. The Company has a rotating board of directors. The Company has over 200m shares on issue. The Company has over 600 registered shareholders. The top 20 registered shareholders hold over 75% of the shares. Many of the top 20 registered shareholders are nominees and hold a significant portion of this percentage. The top 20 beneficial owners of the shares (when looking through nominees) at three particular points in time during the year have less than 75% of the interests in the shares. It is not practicable for the Company to monitor the underlying beneficial interests in its issued shares throughout the entire year of income to determine if it does in fact breach any of the tests in subsection 103A(3) of the ITAA 1936. Accordingly for the purposes of this ruling it is assumed as fact that it breaches at some time in the year the test in subsection 103A(3). No individual or family group controls or is capable of controlling the Company and it is assumed this will be so for the whole of the year.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 103A(5)

Reasons for decision: Summary: Having regard to the factors specified in subsection 103A(5), the Commissioner is satisfied that the Company falls within the general conception of a public company, and ought to be classified as a public company as defined in Division 7 of the ITAA 1936 for the income year ended 30 June 2016.