Ref: AMK:lg
11 October 2022
Director Corporate Tax Policy Unit Treasury Langton Cres PARKES ACT 2600 By Email: frankeddistconsult@treasury.gov.au Dear Sir/Madam FRANKED DISTRIBUTIONS AND CAPITAL RAISING 1.
Thank you for the opportunity to provide comments to the Exposure Draft legislation Treasury Laws Amendment (Measures for a later sitting) Bill 2022: Franked distributions funded by capital raisings (“ED”) and accompanying draft explanatory materials (“EM”).
2.
Pitcher Partners specialises in advising taxpayers in what is commonly referred to as the middle market. Accordingly, we service many clients that would be impacted by the measures proposed in the ED.
3.
We do not support the introduction of the proposed measures contained in the ED. In our view: 3.1.
There is no policy reason why this provision should be applied to privately owned groups. 3.1.1.
Dividends are generally paid through to corporates or individuals (via a trust) who marginal tax rate exceeds the corporate tax rate (i.e. 32.5% marginal tax rate starts from $45,000 of taxable income). It is not common for private companies to be owned by superannuation funds.
3.1.2.
New equity participants may require pre-acquisition profits to be distributed before acquiring new shares in the company (as the preacquisition profits ‘belong’ to the pre-existing shareholders). Taking into account 3.1.1 above, there is no mischief or integrity concern for such arrangements which are commercially driven and seek to cleanup the company’s balance sheet prior to a new owner investing in the company.