ATO to crack down on family business share arrangements

The Australian Tax Office has issued a tax payer alert warning against the use of dividend access share arrangements to circumvent taxation laws, in a move which is set to turn the spotlight on family businesses.

The alert revealed that the ATO will be examining dividend access share arrangements which seek to place the profits of private companies in the hands of shareholders or their associates in a substantially tax free form.

Under these arrangements, a private company with substantial accumulated profits issues a new class of shares to associates of the private company's ordinary shareholders for nominal consideration.

The new shares often carry no voting rights but include the opportunity, not the right, to receive a dividend.

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