Australia: Guidance on tax treatment of off-market share buy-backs
Guidance on changes to tax treatment of off-market share buy-backs offered by listed public companies
Guidance on tax treatment of off-market share buy-backs
The Australian Taxation Office (ATO) published guidance on the changes to the tax treatment of off-market share buy-backs offered by listed public companies that were announced in the 2023 October Budget and have been enacted into law.
According to the ATO, if a listed public company offers an off-market share buy-back after 7:30 pm AEDT on 25 October 2022, the tax treatment for its shareholders will be the same as a shareholder selling their shares on-market. This means the entire buy-back price will be treated as capital proceeds rather than part of the buy-back price being treated as a dividend.
Additionally, the changes will affect distributions received for selective share cancellations offered by a listed public company, which will now be treated as unfrankable distributions.
However, the changes do not affect the tax treatment of off-market share buy-backs offered by companies that are not listed public companies, and shareholders who have previously sold their shares as part of an off-market buy-back may continue to refer to the dividend or distribution statement, or class ruling if applicable.
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