Freightways dividend tax-free
PA ‘ Auckland Freight ways Holdings. Ltd, will make a tax-free distribution to shareholders from realised capital profits with approval of the Inland Revenue Department, joining a growing list of companies to challenge an attempted clamp-down on such sources. The directors said they held a legal opinion that this dividend would be exempt from tax in the hands of shareholders within the provisions of the Income Tax Act 1976.
The company created a capital profit reserve last year by establishing a new wholly-owned subsidiary, Transfin Investments, Ltd. to hold the group investments in both operating subsidiaries and outside companies. The 1981 annual report says . major subsidiaries of the group were sold into Transfin and, subject to approval by’ the Commissioner of Inland Revenue, the resultant realised capital profit of $18,277,000 would be available for payment of tax-free dividends.
According to a spokesman, the company decided to make the interim distribution without approval be-
cause the Inland Revenue Department had failed to clarify the position and a “confusing” situation had arisen for all companies. Previous tax-free payments by Freightways were from share premium and other reserves. Three cents of the 7c interim dividend -has been approved from ordinary capital reserves. Freightways will become only the second listed company to make such a distribution to shareholders without approval. Bendon Industries. Ltd. paid its maiden interim dividend as a listed company in December from capital profits resulting from the internal sale of shares in a subsidiary to a new subsidiary company.
It also claimed legal advice which showed the 6c a share payment was legally tax-free in shareholders’ hands.
The company confirmed that the Inland Revenue Department had written within days requesting details of the transaction which led to the creation of the reserve. But Bendon said that since supplying the information it had heard nothing.
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Press, 13 March 1982, Page 21
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305Freightways dividend tax-free Press, 13 March 1982, Page 21
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