lol...i better send you a bill...your lucky i was bored watching tiny Californian surf
1. I would guess it is not a 'grey area' for the ATO. Instead, it is an area they have probably never addressed because I could not find any ruling on the topic. For example, 'cum dividend' trading had been going on for 13 years before the ATO recently applied Part IVA to deny the franking credit on the cum dividend.
3. I don't know what negative dividends are. Are they costs you incur? Or are they dividends you do not get?
4. As I said, Part IVA is a general anti-avoidance provision. You are creating an artificial scheme that gives an extraordinary tax benefit, albeit, only small. An example of a Part IVA scheme that was banned was the 'split home rental loan', that allowed private home loan interest to be deducted. Another was 'cum dividend franking', where traders sell shares ex-dividend and then use the capital to buy a 'cum dividend' share, thus getting two dividends from one share. Another is end of year tax loss selling. This is not allowed under Part IVA. In your situation, you are placing a short to obtain a discount. I would suggest you give up this idea of shorting to obtaining a CGT discount and simply pretend you are shorting simply to protect your gain. If you simply brainwash yourself you are shorting to protect your gain (rather than obtain a discount) then Part IVA will probably not apply. Your motive is important. Many people insure their shares by placing shorts.
5. Are you sure you are aware of the 45 day franking rule? If you have a short on the share during the 45 day qualifying period to diminish the risk then you probably will not qualify for the franking credit because to obtain a franking credit the shares must be 'held at risk'.
6. The ATO has no discretion in your situation. The only discretions the ATO have are those legislated in the tax legislation. As I said, to deny you a discount, the ATO would have to rule your scheme comes under Part IVA.
7. Personally, I would not worry about it (unless a smart ass from the ATO reads this thread). Imo, your scheme is simply too subtle and of too little value to bother the ATO since the gains you are obtaining are simply too small. As we both agree, you probably have a significant interest component reducing your discount. Also, that so many investors get the 50% discount, it is probably unfair to deny you a discount. You are simply trying to get the same tax benefit that all other long term share holders get therefore, imo, it would be unjust to apply Part IVA to you.
8. Generally Part IVA will apply to significant tax cheating schemes and yours sounds like something very trifling.
