ATO Confirms Tax Treatment of Bravura’s $0.163 Per Share Capital Return

Bravura Solutions Receives Binding Tax Ruling

Bravura Solutions Limited (ASX: BVS), a leading software provider to the wealth management and funds administration sectors, has announced that the Australian Taxation Office (ATO) has issued a final Class Ruling (CR 2025/9) concerning its recent return of capital to shareholders. This ruling provides definitive guidance on the income tax consequences for shareholders who held their shares on capital account when the return was implemented on 30 January 2025.

The return of capital, amounting to $0.163 per ordinary share, was approved by shareholders at the company’s 2024 Annual General Meeting held on 30 October 2024. The ATO’s ruling confirms that this payment is not classified as a dividend, as it was fully debited against Bravura’s share capital account, thereby excluding it from assessable income under dividend provisions.

Tax Implications for Shareholders

For shareholders holding Bravura shares on capital account, the ruling clarifies the application of capital gains tax (CGT) events. Specifically, CGT event G1 occurs on the payment date, triggering a capital gain if the return of capital exceeds the cost base of the shares. Conversely, if the return is less than or equal to the cost base, the cost base is reduced accordingly. The ruling also addresses CGT event C2 for shareholders who disposed of shares prior to the payment date but retained the right to receive the capital return.

Importantly, the ruling excludes the application of certain anti-avoidance provisions (sections 45A, 45B, and 45C of the Income Tax Assessment Act 1936), indicating that the return of capital was conducted in compliance with tax laws without streaming of capital benefits or dividends.

Context of the Capital Return

Bravura’s capital return follows a period of strategic capital management. After a $75.3 million capital raising in March 2023 aimed at enhancing balance sheet flexibility and supporting organisational change initiatives, new management identified the company as overcapitalised. This prompted the decision to return surplus capital to shareholders, culminating in the approved $73.2 million return.

As of 30 June 2024, Bravura reported issued share capital of $432.9 million, accumulated losses of $313.1 million, and a modest profit of $8.8 million for the 2023-24 financial year. The return of capital reflects a recalibration of the company’s capital structure to better align with operational needs and shareholder interests.

Implications for Foreign Shareholders and Market

The ruling also provides clarity for foreign resident shareholders, who may disregard any capital gains or losses arising from the return of capital, subject to certain conditions. This nuance is particularly relevant given Bravura’s international footprint and shareholder base.

With the tax treatment now settled, investors can better assess the net benefit of the capital return. The ruling’s confirmation that the payment is not a dividend may influence shareholder decisions regarding reinvestment or disposition of shares. It also sets a precedent for how Bravura might approach future capital management initiatives.