ATO announcement on dividend washing
The Australian Taxation Office has advised that it will continue its dividend washing program.
The ATO has issued letters to 500 taxpayers who did not respond to its initial letters, and up to 1,500 other taxpayers which updated data analysis suggests may have entered into a dividend washing transaction. So far 1,300 taxpayers have come forward and voluntarily amended their returns.
The letters outline that there will be no penalties for those who have entered into dividend washing transactions and who come forward to self-amend their tax returns before the date specified in the ATO letter. The amendments require the reversal of franking benefits that have been obtained from dividend washing transactions.
Also, for anyone that has entered into dividend washing but has not received a letter from the ATO, they can also amend their returns and have no penalties applied if they amend their tax returns by 22 September 2014.
What is dividend washing?
According to the ATO:Â
"A dividend washing arrangement occurs where a taxpayer sells shares in an ASX listed company after the company's shares trade 'ex-dividend'. As a result of having sold the shares ex-dividend, the taxpayer retains the entitlement to the franked dividend payable on the share. Then, within days of the sale, the taxpayer buys back shares in the same company on the ASX special market, and the taxpayer also becomes entitled to a second franked dividend payable on the newly acquired shares. The end result is that the taxpayer receives two sets of franked dividends on effectively one parcel of shares in relation to the same dividend event."
More information about this announcement can be found on the ATO website by clicking here.
If you have received a letter form the ATO about dividend washing, or think this announcement could affect you then contact Darren Shone from our Taxation team now!