Private ruling: Dividend and reduction of share capital
Date of advice: 8 October 2025
Published: 1 December 2025
Ruling period: 1 July 2024 to 30 June 2025
Date scheme commenced: 18 July 2022

Ruling: Q1: In relation to the reduction of share capital, will Company A be required under subsection 45D(1A) of the Income Tax Assessment Act 1936 (ITAA 1936) to give a copy of the Commissioner's determination to its shareholders? | A1: No. | Q2: Will the dividend paid by Company A be a frankable distribution under section 202-40 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: Yes. | Q3: Will the Commissioner make a determination under paragraph 204-30(3)(a) of the ITAA 1997 that a franking debit arises in Company A's franking account in respect of the dividend? | A3: No. | Q4: Will the Commissioner make a determination under paragraph 177EA(5)(a) of the ITAA 1936 that a franking debit arises in Company A's franking account in respect of the dividend? | A4: No.

Relevant facts and circumstances: Company A is a company incorporated in Australia. Company A paid a reduction of share capital and a dividend to its shareholders. The reduction of share capital was debited to Company A's untainted share capital account. The dividend was debited to Company A's retained earnings account.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 45A | Income Tax Assessment Act 1936 section 45B | Income Tax Assessment Act 1936 section 45D | Income Tax Assessment Act 1936 section 177EA | Income Tax Assessment Act 1997 section 202-40 | Income Tax Assessment Act 1997 section 204-30

Reasons for decision: Summary: As the Commissioner will not make a determination under either section 45A or section 45B of the ITAA 1936, subsection 45D(1A) of the ITAA 1936 does not apply. The dividend is a frankable distribution under section 202-40 of the ITAA 1997 because it is not unfrankable under section 202-45 of the ITAA 1997. The Commissioner will not make a determination under paragraph 177EA(5)(a) of the ITAA 1936 that a franking debit arises in Company A's franking account in respect of the dividend because the conditions of section 177EA of the ITAA 1936 are not satisfied. The Commissioner will not make a determination under paragraph 204-30(3)(a) of the ITAA 1997 that a franking debit arises in Company A's franking account in respect of the dividend because the conditions of section 204-30 of the ITAA 1997 are not satisfied.