On 5 December 2012, the High Court of Australia gave its judgment in Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55. The case concerns the taxation treatment of the proceeds received by Publishing Broadcasting Ltd (PBL) (as the taxpayer was then known) for shares that Crown Melbourne Ltd (CML) bought back pursuant to a share buy-back conducted in accordance with Division 2 of Part 2J.1 of the Corporations Act 2001 (Cth). The issue decided in the case was what constituted a share capital account. The case highlights the following for corporate taxpayers:
While not decided in the case, corporate taxpayers should always be careful not to taint their share capital accounts (that is, transfer profits to their share capital accounts) which will attract adverse income tax consequences (e.g. tainting taxes and prevention of distributing tax-free capital returns). The case, however, does highlight the importance of ensuring that a company's equity and profit accounts are properly kept.
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