The ATO has released its Decision Impact Statement (DIS) in
relation to the Full Federal Court's decision in FCT v
H [2010] FCAFC 128; 2010 ATC 20-218.
The focus of this case is whether income tax and the general
interest charge (GIC) assessed by an amended assessment constitute
a "present legal obligations" when calculating a
company's net assets and distributable surplus under
Division 7A. The relevance of this is that the distributable
surplus is the 'cap' or limit on the amount to be
treated as a deemed dividend under Division 7A.
Broadly, the distributable surplus of a company is worked out as
the net assets less the paid up capital of a company. The net
assets of a company is required to be determined as the amount by
which the company's assets exceed the sum of the
company's various liabilities including the present legal
obligation it has to third parties.
