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Submission on Taxpayer Alert TA 2020/5

The Tax Institute welcomes the opportunity to make a submission to the Australian Taxation Office (ATO) in relation to 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 Taxpayer Alert).

This submission focusses on a number of key aspects which are explained in greater detail below:

  • The ATO should provide further clarity on the particular circumstances in which the use of derivative arrangements is of concern and should also provide guidance on the circumstances in which the use of derivatives does not give rise to concern (refer Section 1);
  • Example 4 should be removed or modified as its scope is too broad and is likely to capture arrangements commonly entered into for commercial reasons unrelated to tax (refer Section 2); and
  • The ATO should clarify its position on the calculation of delta for the purposes of the qualified person rules. As set out below, we submit that delta must be on a portfolio basis (refer Section 3).

In preparing this submission, The Tax Institute has consulted with its Large Business & International Technical Committee, SME & Tax Practitioner Committee and its Superannuation Committee to obtain a breadth of views on the Taxpayer Alert. This submission incorporates feedback received from members of these Committees.

Submission prepared by:

The Tax Institute

Submitted to:

Andrew Grace
Director, Investment Industry Strategy Team, Public Groups & International
Australian Taxation Office
Public Advice and Guidance

For more information, contact:

Michelle Ma
Associate Tax Counsel
The Tax Institute
02 8223 0084