Dividend access shares have received a great deal of attention by the ATO not only in its TA 2012/4 but also in its TD 2013/D5. These reassert the Commissioner’s opinion as seen in other Part IVA rulings and cases, that while a taxpayer may be able to assert with objective evidence that the arrangement is for non-tax related purposes, the taxpayer still needs to demonstrate why such an alleged purpose could not have been achieved in a more simple and streamlined manner – paragraph 4 of TD 2013/D5.
In that determination, the Commissioner demonstrates in several instances his skepticism of the commonly proffered commercial reason of ‘asset protection’ used to justify such arrangements, where the end result is simply a reduction in the taxpayer’s liability.
However, nothing in the taxpayer alert nor in the taxpayer determination appears to prevent dividend access shares being issued at the beginning of the company’s existence. In particular, the issue of such shares at the time of incorporation should not give rise to any Part IVA concern at that time nor at any future time when discretionary dividends are paid on such shares.