Private ruling: Share buy-back
Date of advice: 20 June 2017
Published: October 2017
Ruling period: 1 July 2016 to 30 June 2017

Ruling: Q1: Will Company A derive assessable income, be allowed to claim a deduction, or make a capital gain or capital loss as a result of the buy-back pursuant to section 159GZZZN of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No. | Q2: Will Company A be subject to an obligation to withhold under section 12-210 or section 12-215 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) as a result of the Commissioner making a determination under section 45A or section 45B of the ITAA 1936 that section 45C of the ITAA 1936 applies to deem the whole, or a part, of the buy-back price to be a dividend? | A2: No.

Relevant facts and circumstances: Company A is an Australian tax resident. Company A proposes to undertake an off-market share buy-back. The buy-back price will be wholly debited to the Company A’s share capital account.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 159GZZZN | Income Tax Assessment Act 1936 section 45A | Income Tax Assessment Act 1936 section 45B | Income Tax Assessment Act 1936 section 45C | Taxation Administration Act 1953 section 12-210 of Schedule 1 | Taxation Administration Act 1953 section 12-215 of Schedule 1

Reasons for decision: Summary: The proposed buy-back is an off-market purchase for the purposes of Division 16K of Part III of the ITAA 1936. Section 159GZZZN of the ITAA 1936 will apply so that Company A will not derive assessable income, be allowed to claim a deduction, or make a capital gain or capital loss as a result of the buy-back. As the Commissioner will not make a determination under section 45A and section 45B of the ITAA 1936 that section 45C of the ITAA 1936 applies to deem the whole, or a part of the buy-back price to be a dividend, Company A will not be subject to an obligation to withhold under section 12-210 or section 12-215 of Schedule 1 to the TAA 1953.