Private ruling: Return of capital
Date of advice: 24 April 2026
Published: 13 July 2026
Ruling period: A particular income year
Date scheme commenced: In a prior income year

Ruling: Q1: Will the whole or any part of the distribution made by Aus Co to Foreign Co (Proposed Capital Return) be treated as a dividend within the meaning of subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No. | Q2: Will the Commissioner seek to make a determination under section 45B of the ITAA 1936 that section 45C applies to the whole, or any part, of the Proposed Capital Return? | A2: No.

Relevant facts and circumstances: 1. Aus Co is an Australian tax-resident company that conducts business in Australia and is wholly owned by Foreign Co, a tax-resident in a foreign jurisdiction. 2. In a previous income year, Foreign Co injected an amount of capital into Aus Co in exchange for ordinary shares in Aus Co (Capital Injection), which was fully consumed in Aus Co's business operations and comingled amongst its other funds, including profits. 3. Due to a change in Aus Co's business strategy and the fact that Aus Co is considering winding up its operations, Aus Co no longer requires the Capital Injection to fund its operations. As such, Aus Co is proposing to make a distribution in cash to Foreign Co (Proposed Distribution), comprising a fully-franked dividend (Proposed Dividend) and the Proposed Capital Return. 4. The Proposed Distribution will be funded by cash and other receivables. 5. The Proposed Dividend will be debited against Aus Co's retained profits account, reducing the account balance to zero at the time of the distribution. Aus Co will not have any other realised or unrealised profits. 6. The Proposed Capital Return will be debited against Aus Co's untainted share capital account. 7. Since incorporation, Aus Co has made a number of dividend payments at varying intervals but has not undertaken any previous returns of capital or share buy-backs. 8. The cost base of the shares in Aus Co held by Foreign Co is more than the amount of the Proposed Capital Return. 9. Foreign Co does not have any capital losses. 10. Shares in Aus Co will not be 'taxable Australian property' as defined in section 855-15 of the Income Tax Assessment Act 1997 (ITAA 1997).

Relevant legislative provisions: Income Tax Assessment Act 1936 section 6(1) | Income Tax Assessment Act 1936 subsection 44(1) | Income Tax Assessment Act 1936 section 45B | Income Tax Assessment Act 1936 section 45C | Income Tax Assessment Act 1936 subsection 177D(2) | Income Tax Assessment Act 1997 Division 197 | Income Tax Assessment Act 1997 Division 855 | Income Tax Assessment Act 1997 section 975-300 | Income Tax Assessment Act 1997 subsection 995-1(1)