Income Tax Act 2007 section 594

No tax credits for original owner under repo

Section 594 prevents the original owner of shares from claiming tax credits on dividends where, under a repo arrangement, the owner retains entitlement to the dividends but the interim holder still pays a manufactured dividend to the lender.

• Targets unusual repo arrangements where the original share owner does not transfer dividend entitlement to the interim holder
• Applies where the interim holder nonetheless pays the lender a manufactured dividend despite not receiving the actual dividend entitlement
• Prevents the original owner from obtaining tax credits on the dividends received, blocking the generation of multiple tax credits from the same dividend
• Stops shareholders from exploiting these structured arrangements to claim duplicate or multiple tax credit benefits