Under current arrangements shareholders of listed companies are asked to provide their TFN to the investee company. If shareholders do not provide their TFN, the company must withhold tax at the highest marginal rate on any non-fully franked dividends paid to these shareholders.
In a demerger situation, the demerging company is not permitted to transfer the TFN of a shareholder that will also have or has a shareholding in the resulting spin-off company. As a consequence, the spin-off company must ask each shareholder to provide their TFN.
The Board notes that a streamlining of the process of obtaining TFNs from shareholders of a spin-off company following a demerger could reduce compliance costs for demerger companies and their shareholders.
Does the community think that in respect of demergers it is appropriate for the demerging company to transfer the TFNs of shareholders having an interest in the spin-off company? If not, why not?
As a shareholder, I would welcome the ability for TFN, direct crediting details, communication preferences etc to be carried forward to the demerged entity. I would prefer it to be an opt0out option so the default is to transfer the details unless notified otherwise. From a practical point of view, perhaps it can be implemented as an option in the shareholder preferences of the parent company, whether or not a demerger is proposed. In this way, the shareholders can make a conscious decision, and the permission has already been given should a demerger arise.
An extension of this could also be on IPOs to capture TFN and similar information so the shareholder/unitholder does not have to supply these details later, minimising costs for the company and chance of error fior the investor.
The Board agrees that an opt out option for shareholders would simplify arrangements and is worth investigating.
Does the Sounding Board community agree?
Is this an area that should be simplified or streamlined? Do other Sounding Board users have any thoughts on the priority for this reform? Are there other operating models that we should consider?