196:
But the difference is not large. In a franked dividend, each $ 0.70 cash has $ 0.30 of franking attached (at the 30% company tax rate for 2005). To eligible investors it's worth $ 1.00, to others it's worth only $ 0.70 (of before-tax income in both cases). A typical half-yearly dividend (in 2005)
212:
Part IVA is a set of general anti-avoidance measures addressing schemes with a dominant purpose of creating a tax benefit. Section 177E specifically covers dividend stripping. That section exists to avoid any difficulty that might arise from identifying exactly where a tax benefit arises in
119:
The net effect for the owners is a capital gain of +D and a dividend distribution of -D. The net effect for
StripperCo is nothing; the dividend it receives is income, and its loss on the share trading is a deduction. StripperCo might need to be in the business of share trading to get such a
104:
strategy, enabling a company to distribute profits to its owners as a capital sum, instead of a dividend, which offers tax benefits if the effective tax rate on capital gains is lower than for dividends. For example, consider a company called ProfCo wishing to distribute D, with the help of a
247:
76:
Different tax circumstances of different investors is a factor. A tax advantage available to everyone would be expected to show up in the ex-dividend price fall. But an advantage available only to a limited set of investors might not.
325:
230:
Losses in the company for such related schemes may be recognised immediately in its accounts, or only booked progressively over future years, the latter being various "forward stripping" schemes. Both are caught by section 177E.
274:
306:
are a 2018 investigative report that made public a decade long dividend stripping tax-avoidance scheme in which several
European countries incurred tax loss damages totaling more than 60 billion Euros
332:
371:
137:
The tax treatment for each party in an exercise like this will vary from country to country. The operation may well be caught at some point by tax laws, and/or provide no benefit.
80:
In any case, the amount of profit on such a transaction is usually small, meaning that it may not be worthwhile after brokerage fees, the risk of holding shares overnight, the
288:, dividends may qualify for a lower rate. However, among other things, the stock must be owned for more than 60 days out of a 121-day period around the ex-dividend date.
216:
Section 177E also applies to related schemes which draw off profits from a company, benefitting its owners, not just to the formal payment of a dividend. For example,
157:
the same as for any other investment. But schemes involving a deliberate arrangement by a company's owners to avoid tax are addressed by anti-avoidance provisions of
42:, when the previous owner is entitled to the dividend. On the day the company trades ex-dividend, theoretically the share price drops by the amount of the dividend.
252:
197:
of 2% of the share price would mean an extra 0.85% in franking credits, an amount which might easily be swamped by brokerage and the general risks noted above.
364:
69:
when the shares fall in value (in normal circumstances) on going ex-dividend. This may be profitable if income is greater than the loss, or if the
209:
schemes described above presently fall under anti-avoidance provisions of the Income Tax
Assessment Act part IVA amendments introduced in 1981.
357:
213:
dividend stripping. Dividend stripping will generally result in money to owners being taxed as dividends, irrespective of interposed steps.
602:
226:
Owners (without a separate stripper) selling a part interest in an asset to the company, but later changing the terms to reduce its value.
627:
130:
Such class B shares could have their rights changed by ProfCo, rendering them worthless, instead of
StripperCo selling them back.
162:
158:
621:
1104:
1044:
840:
746:
189:
article), so there's a tension between different investors for the amount shares should fall when going ex-dividend. A
830:
798:
702:
656:
639:
592:
250:
1160:
615:
609:
270:
262:
241:
173:
Dividend stripping by investors has the general advantages or disadvantages described above, but in addition in
1004:
679:
958:
819:
714:
597:
266:
244:
1155:
846:
133:
ProfCo might lend money to
StripperCo for the transaction, instead of the latter needing bridging finance.
127:
StripperCo might buy different "class B" shares in ProfCo for just the D amount, not the whole of ProfCo.
984:
793:
1119:
1039:
804:
788:
751:
633:
576:
544:
1049:
994:
918:
778:
708:
537:
510:
186:
182:
898:
1150:
1089:
1064:
1024:
1009:
928:
867:
825:
569:
479:
469:
85:
953:
938:
690:
220:
The stripper receiving a non-recoverable loan, instead of a dividend from the target company.
1054:
974:
770:
651:
527:
446:
402:
380:
190:
89:
81:
1129:
1124:
1059:
1034:
969:
943:
923:
882:
877:
872:
857:
852:
740:
674:
666:
554:
441:
297:
256:
112:
2. ProfCo, now owned by
StripperCo, declares a dividend of D, which is paid to StripperCo.
1084:
1079:
979:
964:
725:
720:
685:
484:
451:
397:
389:
1144:
948:
933:
908:
862:
814:
517:
474:
461:
412:
285:
206:
101:
50:
1109:
1029:
999:
989:
809:
783:
532:
522:
505:
436:
431:
407:
154:
66:
1114:
1094:
1074:
1069:
1014:
903:
835:
303:
150:
149:, ordinary external investors are free to buy shares cum-dividend and sell them
39:
1099:
1019:
696:
559:
46:
17:
735:
730:
645:
564:
174:
146:
120:
deduction (i.e. treating shares as merchandise instead of capital assets).
913:
549:
178:
35:
757:
185:
system. Those credits can only be used by eligible investors (see the
500:
62:
38:
is declared, called cum-dividend, and then selling them when they go
31:
349:
193:
drop for one group is a bonus or trading opportunity for the other.
326:"Dividend windfall - Santander latest target in Germany's giant..."
109:
1. StripperCo buys ProfCo shares from their present owners for X+D.
423:
353:
70:
240:
Income Tax
Assessment Act 1936, Part IVA (inserted 1981)
115:
3. StripperCo sells its shares back to the owners for X.
223:
The stripper selling a worthless asset to the company.
100:
Dividend stripping or cum-ex trading can be used as a
61:
For an investor, dividend stripping provides dividend
49:
strategy, or by a company's owners or associates as a
45:
This may be done either by an ordinary investor as an
891:
766:
665:
585:
493:
460:
421:
387:
365:
8:
372:
358:
350:
73:treatment of the two gives an advantage.
316:
265:taxation determination TD 95/37 (1995)
177:there are franking credits attached to
7:
153:, and treat the dividend income and
105:stripper company called StripperCo.
25:
246:. And the explanatory memorandum
628:Electronic communication network
273:taxpayer alert TA 2004/3 (2004)
205:The kind of dividend stripping
324:O'Donnell, John (2018-10-18).
163:Income Tax Assessment Act 1936
123:Many variations are possible:
1:
622:Multilateral trading facility
243:, in particular section 177E
1045:Returns-based style analysis
841:Post-modern portfolio theory
747:Security characteristic line
799:Efficient-market hypothesis
703:Capital asset pricing model
640:Straight-through processing
1177:
616:Alternative Trading System
271:Australian Taxation Office
263:Australian Taxation Office
30:is the practice of buying
680:Arbitrage pricing theory
34:a short period before a
959:Initial public offering
820:Modern portfolio theory
715:Dividend discount model
598:List of stock exchanges
847:Random walk hypothesis
985:Market capitalization
794:Dollar cost averaging
805:Fundamental analysis
789:Contrarian investing
752:Security market line
657:Liquidity aggregator
634:Direct market access
545:Quantitative analyst
88:if the market lacks
1050:Reverse stock split
995:Market manipulation
919:Dual-listed company
779:Algorithmic trading
709:Capital market line
511:Inter-dealer broker
335:on October 18, 2018
187:dividend imputation
183:dividend imputation
1090:Stock market index
929:Efficient frontier
868:Technical analysis
826:Momentum investing
648:(private exchange)
538:Proprietary trader
480:Shares outstanding
470:Authorised capital
255:2007-09-27 at the
28:Dividend stripping
1161:Capital budgeting
1138:
1137:
939:Flight-to-quality
691:Buffett indicator
381:Financial markets
191:rationally priced
16:(Redirected from
1168:
1055:Share repurchase
767:Trading theories
652:Crossing network
610:Over-the-counter
447:Restricted stock
403:Secondary market
374:
367:
360:
351:
344:
343:
341:
340:
331:. Archived from
321:
21:
1176:
1175:
1171:
1170:
1169:
1167:
1166:
1165:
1141:
1140:
1139:
1134:
1125:Voting interest
1035:Public offering
970:Mandatory offer
944:Government bond
924:DuPont analysis
887:
883:Value investing
878:Value averaging
873:Trend following
858:Style investing
853:Sector rotation
768:
762:
741:Net asset value
667:Stock valuation
661:
581:
489:
456:
442:Preferred stock
417:
383:
378:
348:
347:
338:
336:
323:
322:
318:
313:
298:Asset stripping
294:
282:
257:Wayback Machine
237:
203:
171:
143:
98:
59:
23:
22:
15:
12:
11:
5:
1174:
1172:
1164:
1163:
1158:
1153:
1143:
1142:
1136:
1135:
1133:
1132:
1127:
1122:
1117:
1112:
1107:
1102:
1097:
1092:
1087:
1085:Stock exchange
1082:
1080:Stock dilution
1077:
1072:
1067:
1062:
1057:
1052:
1047:
1042:
1037:
1032:
1027:
1022:
1017:
1012:
1007:
1005:Mean reversion
1002:
997:
992:
987:
982:
980:Market anomaly
977:
972:
967:
962:
956:
951:
946:
941:
936:
931:
926:
921:
916:
911:
906:
901:
899:Bid–ask spread
895:
893:
889:
888:
886:
885:
880:
875:
870:
865:
860:
855:
850:
844:
838:
833:
828:
823:
817:
812:
807:
802:
796:
791:
786:
781:
775:
773:
764:
763:
761:
760:
755:
749:
744:
738:
733:
728:
726:Earnings yield
723:
721:Dividend yield
718:
712:
706:
700:
694:
688:
683:
677:
671:
669:
663:
662:
660:
659:
654:
649:
643:
637:
631:
625:
619:
613:
612:(off-exchange)
607:
606:
605:
600:
589:
587:
586:Trading venues
583:
582:
580:
579:
574:
573:
572:
562:
557:
552:
547:
542:
541:
540:
535:
525:
520:
515:
514:
513:
508:
497:
495:
491:
490:
488:
487:
485:Treasury stock
482:
477:
472:
466:
464:
458:
457:
455:
454:
452:Tracking stock
449:
444:
439:
434:
428:
426:
419:
418:
416:
415:
410:
405:
400:
398:Primary market
394:
392:
385:
384:
379:
377:
376:
369:
362:
354:
346:
345:
315:
314:
312:
309:
308:
307:
300:
293:
290:
281:
278:
277:
276:
268:
260:
236:
233:
228:
227:
224:
221:
202:
199:
170:
167:
142:
139:
135:
134:
131:
128:
117:
116:
113:
110:
97:
94:
84:, or possible
58:
55:
24:
18:Dividend strip
14:
13:
10:
9:
6:
4:
3:
2:
1173:
1162:
1159:
1157:
1156:Tax avoidance
1154:
1152:
1149:
1148:
1146:
1131:
1128:
1126:
1123:
1121:
1118:
1116:
1113:
1111:
1108:
1106:
1103:
1101:
1098:
1096:
1093:
1091:
1088:
1086:
1083:
1081:
1078:
1076:
1073:
1071:
1068:
1066:
1063:
1061:
1060:Short selling
1058:
1056:
1053:
1051:
1048:
1046:
1043:
1041:
1038:
1036:
1033:
1031:
1028:
1026:
1023:
1021:
1018:
1016:
1013:
1011:
1008:
1006:
1003:
1001:
998:
996:
993:
991:
988:
986:
983:
981:
978:
976:
973:
971:
968:
966:
963:
960:
957:
955:
952:
950:
949:Greenspan put
947:
945:
942:
940:
937:
935:
934:Financial law
932:
930:
927:
925:
922:
920:
917:
915:
912:
910:
909:Cross listing
907:
905:
902:
900:
897:
896:
894:
892:Related terms
890:
884:
881:
879:
876:
874:
871:
869:
866:
864:
863:Swing trading
861:
859:
856:
854:
851:
848:
845:
842:
839:
837:
834:
832:
831:Mosaic theory
829:
827:
824:
821:
818:
816:
815:Market timing
813:
811:
808:
806:
803:
800:
797:
795:
792:
790:
787:
785:
782:
780:
777:
776:
774:
772:
765:
759:
756:
753:
750:
748:
745:
742:
739:
737:
734:
732:
729:
727:
724:
722:
719:
716:
713:
710:
707:
704:
701:
698:
695:
692:
689:
687:
684:
681:
678:
676:
673:
672:
670:
668:
664:
658:
655:
653:
650:
647:
644:
641:
638:
635:
632:
629:
626:
623:
620:
617:
614:
611:
608:
604:
603:Trading hours
601:
599:
596:
595:
594:
591:
590:
588:
584:
578:
575:
571:
568:
567:
566:
563:
561:
558:
556:
553:
551:
548:
546:
543:
539:
536:
534:
531:
530:
529:
526:
524:
521:
519:
518:Broker-dealer
516:
512:
509:
507:
504:
503:
502:
499:
498:
496:
492:
486:
483:
481:
478:
476:
475:Issued shares
473:
471:
468:
467:
465:
463:
462:Share capital
459:
453:
450:
448:
445:
443:
440:
438:
435:
433:
430:
429:
427:
425:
420:
414:
413:Fourth market
411:
409:
406:
404:
401:
399:
396:
395:
393:
391:
386:
382:
375:
370:
368:
363:
361:
356:
355:
352:
334:
330:
327:
320:
317:
310:
305:
301:
299:
296:
295:
291:
289:
287:
286:United States
280:United States
279:
275:
272:
269:
267:
264:
261:
258:
254:
251:
248:
245:
242:
239:
238:
234:
232:
225:
222:
219:
218:
217:
214:
210:
208:
207:tax avoidance
201:Tax avoidance
200:
198:
194:
192:
188:
184:
180:
176:
168:
166:
164:
160:
156:
152:
148:
140:
138:
132:
129:
126:
125:
124:
121:
114:
111:
108:
107:
106:
103:
102:tax avoidance
96:Tax avoidance
95:
93:
91:
87:
83:
82:market spread
78:
74:
72:
68:
64:
56:
54:
52:
51:tax avoidance
48:
43:
41:
37:
33:
29:
19:
1110:Tender offer
1030:Public float
1000:Market trend
990:Market depth
810:Growth stock
784:Buy and hold
693:(Cap-to-GDP)
533:Floor trader
523:Market maker
506:Floor broker
494:Participants
437:Golden share
432:Common stock
408:Third market
337:. Retrieved
333:the original
328:
319:
283:
229:
215:
211:
204:
195:
172:
155:capital loss
144:
136:
122:
118:
99:
79:
75:
67:capital loss
60:
44:
27:
26:
1115:Uptick rule
1095:Stock split
1075:Squeeze-out
1070:Speculation
1015:Open outcry
904:Block trade
836:Pairs trade
304:CumEx-Files
151:ex-dividend
40:ex-dividend
1145:Categories
1120:Volatility
1100:Stock swap
1020:Order book
771:strategies
697:Book value
565:Arbitrager
560:Speculator
339:2018-10-18
311:References
181:under the
53:strategy.
47:investment
1151:Dividends
736:Fed model
731:EV/EBITDA
646:Dark pool
577:Regulator
422:Types of
388:Types of
179:dividends
175:Australia
169:Investors
147:Australia
141:Australia
90:liquidity
57:Investors
1065:Slippage
1025:Position
1010:Momentum
914:Dividend
593:Exchange
550:Investor
292:See also
253:Archived
159:Part IVA
86:slippage
65:, and a
36:dividend
954:Haircut
758:T-model
570:Scalper
390:markets
329:Reuters
284:In the
235:Sources
975:Margin
843:(PMPT)
705:(CAPM)
555:Hedger
528:Trader
501:Broker
424:stocks
63:income
32:shares
1130:Yield
1105:Trade
1040:Rally
961:(IPO)
849:(RMH)
822:(MPT)
801:(EMH)
754:(SML)
743:(NAV)
717:(DDM)
711:(CML)
682:(APT)
675:Alpha
642:(STP)
636:(DMA)
630:(ECN)
624:(MTF)
618:(ATS)
965:Long
769:and
699:(BV)
686:Beta
302:The
161:the
145:In
71:tax
1147::
249:,
165:.
92:.
373:e
366:t
359:v
342:.
259:.
20:)
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