Private ruling: Section 207-159 - distributions funded by capital raising
Date of advice: 15 July 2025
Published: 1 September 2025
Ruling period: 1 January 2025 to 31 December 2025
Date scheme commenced: 1 January 2025

Ruling: Q1: In applying paragraph 202-5(b) and section 202-40 of the Income Tax Assessment Act 1997 (ITAA 1997), will the proposed dividend be an unfrankable distribution under paragraph 202-45(ea) of the ITAA 1997 because it is a distribution to which subsection 207-159(1) of the ITAA 1997 applies? | A1: No.

Relevant facts and circumstances: A company incorporated in Australia has a publicly announced capital management policy. The company has regularly paid fully franked dividends in respect of its ordinary shares. The company has previously issued an 'equity interest' (within the meaning given by Subdivision 974-C of the ITAA 1997) to support the company's growth plans and maximise shareholder returns via a diversified and optimised capital base. As part of the company's capital management policy, the company is proposing to pay a special dividend (the proposed dividend). Payment of the proposed dividend is consistent with the company's publicly announced capital management policy.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 202-5(b) | Income Tax Assessment Act 1997 section 202-40 | Income Tax Assessment Act 1997 paragraph 202-45(ea) | Income Tax Assessment Act 1997 section 207-159

Reasons for decision: Summary: The proposed dividend will not be unfrankable pursuant to paragraph 202-45(ea) of the ITAA 1997 because the conditions of subsection 207-159(1) of the ITAA 1997 are not satisfied.