Preamble
No. If a liquidator makes a distribution in accordance with the Archer Brothers principle, subsection 47(1) applies only to the extent that the distribution is appropriated by the liquidator from 'income' (in terms of subsections 47(1) and 47(1A)) derived by the company.
We recognise that capital losses may lead to a loss of distributable funds so that a notional capital gain calculated under Step 2 of the method statement in paragraph 47(1A)(b) cannot be distributed. In this case, the requirement in paragraph 47(1A)(b) to disregard capital losses in recalculating a notional capital gain may have no practical effect. We accept that subsection 47(1) cannot operate to deem any more than the amount actually distributed to be a dividend. * The Archer Brothers principle is discussed in Taxation Determination TD 95/10.
Three possible sets of company accounts for XYZ Ltd (in liquidation) are illustrated in column one of the following table. Assume in relation to each alternative set of accounts that Ms Jones, the appointed liquidator, makes distributions in accordance with the Archer Brothers principle. The subsection 47(1) implications of those distributions are shown in column two. If distributions are not made in accordance with the Archer Brothers principle, the subsection 47(1) implications are shown in column three. It is assumed that the liquidator distributes all the available funds as one final distribution.
In the table below, the following abbreviations are used: • SCA: the balance of the share capital account of XYZ Ltd • CG/CL: a capital gain (loss) made by the company on the disposal of an asset acquired after 19 September 1985 (after allowing for tax where relevant but, in the case of gains, ignoring indexation) • Pre CG: a non-assessable capital gain on the disposal of an asset acquired before 20 September 1985 • DF: distributable funds.
This Taxation Determination rewrites and replaces Taxation Determination 95/11. There is no material change in this Taxation Determination to the views expressed in TD 95/11 apart from updating it with a recent Corporations Law change.