Answers to

Notes

Answers to Class Exercise: Is there a Dividend? All references are to Subpart CD of the Income Tax Act 2007 (no account has been had for any potential GST issues present) 1. Parent pays a cash dividend to Shareholder • This is a “normal” company law dividend, declared by Directors of Parent Co. • It will be taxable income to Shareholder under section CD 1 . • Directors should think about the Imputation profile and fully impute if possible. 2. Parent provides car to Shareholder (not an employee) • No employment relationship (unless Spouse is an employee?), so no Fringe Benefit Tax issues. • A “deemed” dividend exists, which is taxable income to Shareholder under section CD 1. • Directors should think about the Imputation profile and fully impute if possible. 3. Parent provides car to Spouse (Shareholder is an employee) • Spouse is associated with Shareholder, and Shareholder is an employee so FBT rules will prevail. • Fringe Benefit is a “Classified Benefit” so Parent cannot elect out of FBT rules, into the Dividend rules, under Section CX 17. • The benefit is not a dividend under section CD 32. 4. Subsidiary pays a cash dividend to Parent • This is a “normal” company law dividend, ...