BALDWINS • FoodLegal

Australian Lawyers and Consultants

The Company CGT Claw-back

September 2001

Tax Determination TD 95/14 highlights the fact that on a liquidator’s final distribution of the CGT-exempt component of a capital profit reserve (e.g. part of the price derived on business sale of “active assets” such as goodwill), the ATO will not deem the distributed amount to be a dividend.

However, one needs to remind oneself that CGT Event G1 (sec. 104-135) WILL usually generate an assessable capital gain for the shareholder (of a post-CGT share) who receives that component even though it was exempt when derived by the company. The shareholder may still derive an assessable capital gain equal to the payment received less the cost base of the shares, subject to CGT rollover possibilities.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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