What happens if the total amount of provisional dividends exceeds the distributable surplus at the end of the income year?
There is a proportionate reduction in the amount of each ‘provisional dividend’, such that the total amount of ‘provisional dividends’ for the income year does not exceed the private company’s distributable surplus for that income year. The reduced amount of each dividend that the private company is taken to have paid is worked out using the following formula: The term ‘provisional dividend’ means the amount of the dividend the private company is taken to have paid under Division 7A prior to any reduction due to the company’s distributable surplus. (See subsection 109Y(3).) 106. Given that a private company’s distributable surplus may reduce the amount of a dividend, how will a shareholder or shareholder’s associate that is taken to have received a dividend know the amount of that dividend? Where the private company is taken to have paid a dividend and the amount of the dividend is reduced (so that the sum of the dividends taken to have been paid does not exceed the company’s distribut
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