For those playing at home:
Private companies with accumulated profits may issue a new class of shares to associates of the ordinary shareholders of the private company. These new classes of shares are created and often issued for nominal consideration. They do not carry any voting rights but usually carry the opportunity to receive dividends.
Subsequently, when the accumulated profits of the private company are distributed to the new shareholders, the tax paid is often substantially less than what would have been recognised in the hands of the original shareholders.
Although private companies and their advisors may have a commercial rationale for creating such arrangements i.e. asset protection, estate planning or as a performance incentive mechanism for personnel, the Commissioner will be checking to ensure these arrangements have not been set up for a tax avoidance purpose.