Australia: Imputation benefits and use of derivative instruments in structured arrangements

Australia: Imputation benefits

The Australian Taxation Office (ATO) issued a taxpayer alert, expressing concerns that some Australian taxpayers involved in certain arrangements intended to provide imputation benefits in respect to a parcel of shares may be claiming imputation benefits that they are not entitled to under the law.

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Read the taxpayer alert—TA 2020/5 Structured arrangements that provide imputation benefits on shares acquired where economic exposure is offset through use of derivative instruments

  • The ATO has become aware of the common use of derivatives in combination with the holding of physical assets to obtain the desired exposure to underlying investment assets.
  • While the ATO has no concerns with the use of derivatives per se and understands their use in a re-balancing scenario, there are concerns in relation to certain structured arrangements that provide imputation benefits, when economic exposure is offset through the use of derivative instruments. 
  • In the taxpayer alert, the ATO has articulated its views on the type of structured arrangements for which it has compliance concerns. In particular, the taxpayer alert provides four examples of specific transactions that the ATO has concerns about. 
  • In addition, the taxpayer alert provides the ATO’s view on how it calculates the delta over a parcel of shares, including the parcel of shares that is the subject of the structured arrangement. 
  • Further, when these shares are acquired directly or via acquiring units in a managed fund, the ATO provided its views on what provisions it would rely on to deny the imputation benefits in each scenario.


For more information, contact a KPMG tax professional in Australia:

Damian Ryan | +61 2 9335 7998 | dryan@kpmg.com.au

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