Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 802.60

  (1)   Subsection   (2) has effect if:

  (a)   an * Australian corporate tax entity makes one or more * frankable distributions in a * franking period; and

  (b)   at least one of the * distributions has an * unfranked part; and

  (c)   the entity declares an amount of the unfranked part to be * conduit foreign income.

  (2)   If the entity does not, for that * franking period, declare the same proportion of * conduit foreign income for all * membership interests and * non - share equity interests then, instead of the amount that it declared to be conduit foreign income on those * distributions, it is taken to have declared under section   802 - 45 the greater amount that it would have declared had it declared that same proportion on all those distributions.

Note:   Breaching subsection   (2) may make the entity subject to a penalty under section   288 - 80 in Schedule   1 to the Taxation Administration Act 1953 (about over declaring conduit foreign income).

Example:   There are 10,000 membership interests in AusCo Limited, 7,500 held by foreign residents and 2,500 held by Australian residents. It has $1,800 of conduit foreign income.

  AusCo makes an unfranked distribution of 50 cents per membership interest to all of its members. It declares $1,500 of the distribution to be conduit foreign income for its 7,500 foreign membership interests (20 cents per membership interest or 40% of each distribution) and none for its Australian membership interests.

  AusCo is taken to have declared the same proportion (40% of each distribution) of conduit foreign income for its Australian membership interests (which amounts to $500 of conduit foreign income). It is therefore taken to have declared $2,000 of conduit foreign income. This is an over - declaration of $200 and a penalty under section   288 - 80 in Schedule   1 to the Taxation Administration Act 1953 will apply.

  (3)   For the purposes of subsection   (2), ignore * membership interests and * non - share equity interests that do not carry a right to receive * distributions (other than distributions on winding up).

  (4)   Despite subsection   (2), an entity that receives a * frankable distribution that has an * unfranked part   is entitled to rely on the * distribution statement made by the entity that made the distribution.

Table of Subdivisions

815 - A   Treaty - equivalent cross - border transfer pricing rules

815 - B   Arm's length principle for cross - border conditions between entities

815 - C   Arm's length principle for permanent establishments

815 - D   Special rules for trusts and partnerships

815 - E   Reporting obligations for country by country reporting entities