Tax Ruling Shields FAR Shareholders from Dividend Tax Risks
FAR Limited shareholders receive clarity as the Australian Taxation Office confirms the recent 8-cent per share capital return is not a dividend for tax purposes.
- ATO issues Class Ruling on FAR Limited’s capital return
- 8 cents per share capital return confirmed as non-dividend
- Qualifying shareholders eligible for discounted capital gains treatment
- Certain foreign shareholders can disregard capital gains or losses
- Tax treatment applies to shareholders holding shares on capital account
ATO Class Ruling Brings Tax Certainty
FAR Limited (ASX – FAR) has received a significant regulatory nod from the Australian Taxation Office (ATO) with the publication of Class Ruling CR 2025/44. This ruling clarifies the tax treatment of the company’s recent capital return of 8 cents per share, which was approved by shareholders in May and paid in June 2025.
The ruling confirms that this capital return will not be treated as a dividend for Australian income tax purposes. This distinction is crucial for shareholders, as dividends typically attract different tax implications compared to capital returns.
Implications for Shareholders
For shareholders registered on FAR’s share register as of 5 June 2025 and who held their shares on capital account, the ruling offers a welcome tax advantage. These shareholders can treat any capital gain arising from the return as a discounted capital gain, potentially reducing their tax liability.
Moreover, the ruling provides relief for certain foreign resident shareholders, allowing them to disregard any capital gains or losses resulting from the capital return. This aspect may encourage continued international investment in FAR Limited shares.
Navigating Individual Tax Circumstances
While the ruling offers a general framework, FAR Limited emphasizes that the tax consequences will vary depending on individual shareholder circumstances. Shareholders subject to the taxation of financial arrangements rules, or those holding shares on revenue account, may not benefit from the same treatment.
FAR’s Chairman, Patrick O’Connor, advises shareholders to consult their own tax advisers to fully understand the implications of the capital return on their personal tax positions. This prudent approach ensures investors can make informed decisions in light of the ruling.
Looking Ahead
The ATO’s ruling not only provides clarity but also underscores the importance of transparent communication between companies and their investors regarding tax matters. As FAR Limited continues to manage its capital structure, shareholders will be watching closely for any further developments that could impact their investment returns.
Bottom Line?
With tax clarity secured, FAR Limited’s capital return sets a precedent for shareholder-friendly distributions.
Questions in the middle?
- How will the ruling influence FAR Limited’s future capital management strategies?
- What proportion of shareholders qualify for the discounted capital gains treatment?
- Could further ATO guidance affect foreign shareholders’ tax positions?
