GTN’s Capital Return Raises Questions on Debt and Shareholder Tax Impact

Background to the Capital Return

GTN Limited (ASX – GTN), a broadcast media advertising company operating across Australia, Canada, the UK, and Brazil, recently completed a $0.23 per share capital return to shareholders. This payment, totalling approximately $44 million, was approved by shareholders in late July 2025 and paid out on 11 August 2025. The capital return was funded through a combination of a new external debt facility and existing cash reserves, marking a significant capital management move for the company.

ATO Class Ruling Clarifies Tax Treatment

The Australian Taxation Office (ATO) has now issued a final Class Ruling (CR 2025/65) confirming that this capital return is not classified as a dividend for Australian income tax purposes. This distinction is crucial because it means shareholders will not include the payment as assessable income under dividend rules. Instead, the payment affects the cost base of their shares for capital gains tax (CGT) calculations.

For Australian resident shareholders holding GTN shares on capital account, the cost base of each share is reduced by $0.23. If the cost base is less than this amount, a capital gain arises equal to the difference, which may be eligible for the CGT discount if the shares were held for at least 12 months. Foreign resident shareholders, meanwhile, generally disregard any capital gains arising from this capital return, provided certain conditions are met.

Implications for GTN and Shareholders

Importantly, the ruling confirms that GTN itself faces no adverse tax consequences from the capital return. The payment was debited against GTN’s share capital account without cancelling any shares or altering shareholders’ proportional interests. This means the capital return is a return of invested capital rather than profit distribution, which aligns with GTN’s broader capital management strategy following a net loss after tax of $6.1 million for the fiscal year ended 30 June 2025.

GTN has historically targeted a 100% payout ratio of net profit after tax through dividends but did not pay a final dividend for FY25. Instead, this capital return represents a different approach to returning value to shareholders, possibly reflecting the company’s current financial position and strategic priorities.

What Shareholders Should Consider

Shareholders are advised to review the full Class Ruling and consult their tax advisers to understand the specific implications based on their circumstances. The ruling applies only to those holding shares on capital account and excludes temporary residents and those subject to certain tax arrangements. Given that approximately 32% of GTN’s shares are held by foreign residents, the ruling’s clarification on CGT exemptions for these investors is particularly relevant.

Overall, the ATO’s binding ruling provides certainty around the tax treatment of this capital return, reducing ambiguity for investors and supporting GTN’s transparent communication with the market.