Document ID: chunk:federal_register_of_legislation:C2025C00014:section:109y:p1
Version: federal_register_of_legislation:C2025C00014
Segment Type: section
Provision Reference: s 109Y (pt 1/2)
Character Range: 998963–1001678

109Y  Proportional reduction of dividends so they do not exceed distributable surplus

Reduction of amounts of dividends
 (1) If, apart from this section, the sum of all the dividends a private company is taken under this Division to pay at the end of the year of income would be more than the company's distributable surplus for that year, the amount of each of those dividends is the amount worked out under subsection (3).

Distributable surplus
 (2) A private company's distributable surplus for its year of income is the amount worked out using the formula:

where:
Division 7A amounts is the total of any amounts the company is taken under section 109C or 109F to have paid as dividends in the year of income apart from this section.
net assets means the amount (if any), at the end of the company's year of income, by which the company's assets (according to the company's accounting records) exceed the sum of:
 (a) the present legal obligations of the company to persons other than the company; and
 (b) the following provisions (according to the company's accounting records):
 (i) provisions for depreciation;
 (ii) provisions for annual leave and long service leave;
 (iii) provisions for amortisation of intellectual property and trade marks;
 (iv) other provisions prescribed under regulations made for the purposes of this subparagraph.
If the Commissioner considers that the company's accounting records significantly undervalue or overvalue its assets or undervalue or overvalue its provisions, the Commissioner may substitute a value that the Commissioner considers is appropriate.
non‑commercial loans means the total of:
 (a) any amounts that:
 (i) the company is taken under former section 108, or section 109D or 109E, to have paid as dividends in earlier years of income; and
 (ii) are shown as assets in the company's accounting records at the end of year of income; and
 (b) any amounts that are included in the assessable income of shareholders, or associates of shareholders, of the company under section 109XB as if the amounts were dividends paid by the company in earlier years of income.
Note: The total amount worked out under paragraph (b) might be reduced under subsection (2A).
paid‑up share value is the paid‑up share capital of the company at the end of its year of income.
repayments of non‑commercial loans means the total of:
 (a) any repayments to the company of loans or amounts that have been taken by former section 108, or section 109D or 109E, to be dividends; and
 (b) amounts set off against loans that have been taken by former section 108, or section 109D or 109E, to be dividends, other than such amounts that are set off as a result of:
 (i) a dividend (being a