What this ruling covers
The Australian Taxation Office (ATO) has issued Class Ruling CR 2026/59 covering the tax treatment of bonus shares issued to shareholders of WAM Microcap Limited under its Dividend Substitution Share Plan (DSSP).
The ruling applies to Australian resident shareholders who hold their WAM Microcap Limited shares on capital account and participate in the DSSP between 1 July 2026 and 30 June 2031.
Key tax outcomes confirmed by the ruling
Bonus shares are not taxed as dividends
The ruling confirms that shareholders who choose to receive bonus shares instead of cash dividends are not taxed on those shares as dividends. No anti-avoidance rules apply to deem the bonus shares assessable income.
Cost base treatment
The cost base of the original shares is spread across both the original shares and the new bonus shares on a pro rata basis when bonus shares are issued.
Franking credits
No franking credits attach to bonus shares received under the DSSP. Franking credit offsets cannot be claimed on these shares.
Taxation of financial arrangements - Division 230 of the ITAA 1997
The ruling does not apply to shareholders who are subject to the taxation of financial arrangements rules under Division 230 of the ITAA 1997. The source notes this is generally not applicable to individuals unless elected.
Key actions
- Australian resident shareholders in WAM Microcap Limited holding shares on capital account can check whether they are enrolled in or eligible for the DSSP - this ruling confirms the tax treatment for participants.
- Shareholders who receive bonus shares under the DSSP are not required to include them as assessable dividend income in their tax return, as the ruling confirms they are not treated as dividends.
- When bonus shares are issued, the original cost base is required to be spread across both the original shares and the new bonus shares on a pro rata basis as set out in the ruling.
- No franking credit offsets are to be claimed on bonus shares received under the DSSP, as no franking credits attach to those shares.
- Shareholders subject to the taxation of financial arrangements rules under Division 230 of the ITAA 1997 are outside the scope of this ruling.
Source and further information
The full text of Class Ruling CR 2026/59 is available on the ATO website.
This is a plain-English summary for information only, not legal or compliance advice. Always check the official source or consult a qualified professional.