Dividend Access Shares (DAS) and Small Business CGT Concessions: What business owners need to know

For many privately owned businesses, dividend access shares (DAS) have long been used as part of broader tax planning and succession strategies. However, advisers have historically been concerned that the existence of dividend access shares could jeopardise access to the valuable small business capital gains tax (CGT) concessions when a business is sold.

Fortunately, court decisions have provided greater clarity on how dividend access shares interact with the small business CGT concession rules.

What are dividend access shares?

Dividend access shares are a special class of shares that typically provide limited rights to the holder. While the specific terms vary, these shares generally:

• Entitle the holder to receive dividends only if the directors decide to declare them;
• Do not provide voting rights; and
• Do not give the holder rights to participate in capital distributions.

In practice, dividend access shares can offer flexibility in distributing company profits among family members or related entities, making them a common feature in private company structures.

Why do they matter for CGT concessions?

Australia’s small business CGT concessions can significantly reduce or eliminate tax on the sale of eligible business assets. To access these concessions, certain ownership and participation requirements must be satisfied.

One key test involves identifying whether there is a “significant individual” in the company. Broadly, an individual must hold at least a 20% small business participation percentage, which considers voting rights, dividend rights and rights to capital distributions.

Historically, concerns arose because a dividend access share could potentially receive 100% of future dividends if directors chose to distribute profits solely to that class of shares. This raised questions about whether ordinary shareholders could still satisfy the participation percentage requirements needed to access CGT concessions.

The Devuba decision

The issue was considered in the landmark case of Devuba Pty Ltd v Commissioner of Taxation. In this matter, a company sold shares and sought to apply the small business CGT concessions to reduce its capital gain.

The company’s ownership structure included ordinary shares and a dividend access share. The Australian Taxation Office argued that because the dividend access share could theoretically receive dividends in the future, the participation percentage tests were not met.

The Tribunal disagreed.

It found that the relevant test must be applied based on the rights that existed immediately before the CGT event. At that time, the dividend access share did not have an active entitlement to dividends because the directors had not passed a resolution granting that right.

As a result, the ordinary shareholders retained the relevant dividend rights for the purposes of the participation percentage calculation, allowing the taxpayer to access the small business CGT concessions. The decision was later upheld by the Full Federal Court.

Practical implications for business owners

The Devuba decision provides reassurance that the mere existence of a dividend access share will not automatically prevent access to the small business CGT concessions. The specific rights attached to the shares, and whether those rights have been activated at the relevant time, are critical considerations.

However, dividend access shares remain an area of ongoing scrutiny by the ATO, particularly where arrangements are used primarily to obtain tax advantages. Careful structuring and documentation are essential.

Key Takeaways

• Dividend access shares can provide flexibility in private company structures.
• Concerns have existed that these shares may affect eligibility for the small business CGT concessions.
• The courts have confirmed that dormant dividend access shares do not necessarily prevent access to the concessions.
• The rights attaching to the shares immediately before the CGT event are critical.
• Professional tax and legal advice should be obtained before implementing or modifying any dividend access share arrangement.

If you are considering a business sale, succession planning strategy, or reviewing your company structure, understanding the interaction between share classes and the small business CGT concessions is essential.

Our team can help assess your eligibility for CGT concessions, review existing company structures, and identify opportunities to achieve the best possible tax outcome while remaining compliant with current legislation.

t: +61 7 3177 4120
e: advisors@hksrussell.com

Posted on June 16, 2026 by Charisse Russell - Articles