What this ruling covers
The Australian Taxation Office has issued Class Ruling CR 2026/56 for WAM Leaders Limited shareholders who choose to receive bonus shares instead of cash dividends under the company's Dividend Substitution Share Plan (DSSP).
The ruling runs from 1 July 2026 to 30 June 2031.
How bonus shares are treated for income tax
The ruling confirms that bonus shares received under the DSSP are not treated as dividends for income tax purposes. Bonus shares received under this plan are not included in assessable income.
Key tax consequences
The ruling sets out the following tax consequences for eligible shareholders:
- Bonus shares take on the acquisition date of the shareholder's original WAM Leaders shares.
- The cost base of original shares is spread across both the original and bonus shares on a pro rata basis, as required under table item 1 of subsection 130-20(3) of the ITAA 1997.
- No franking credits attach to the bonus shares.
- A deduction cannot be claimed under section 115-280 of the ITAA 1997 for any capital gain made on the bonus shares.
Eligibility criteria stated in the ruling
The ruling applies to shareholders who:
- are Australian residents,
- are listed on the share register on the record date, and
- hold their WAM Leaders shares on capital account - not as trading stock or revenue assets.
The ruling does not apply to shareholders who are subject to Division 230 taxation of financial arrangements rules.
Key actions
The ruling sets out steps for eligible participating shareholders:
- Confirm eligibility by checking that all criteria in the ruling are met - Australian residency, listed on the share register on the record date, and shares held on capital account.
- Update records to reflect that bonus shares received under the DSSP take the same acquisition date as the original WAM Leaders shares, as this affects CGT discount eligibility calculation.
- Recalculate the cost base of original and bonus WAM Leaders shares on a pro rata basis across the combined parcel, as required under table item 1 of subsection 130-20(3) of the ITAA 1997.
- Note that no franking credits attach to the bonus shares and no deduction under section 115-280 of the ITAA 1997 is available for any capital gain made on them.
- Read the full ruling at https://www.ato.gov.au/law/view/document?docid=CLR/CR202656/NAT/ATO/00001 or consult a tax adviser if subject to Division 230 taxation of financial arrangements rules, as the ruling does not apply in that case.
This is a plain-English summary for information only, not legal or compliance advice. Always check the official source or consult a qualified professional.