Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1936
1 Subsections 46F(2), (2A) and (2B)
Repeal the subsections, substitute:
(2) Subject to this section, a shareholder is not entitled to, and must not be allowed, a rebate under section 46 or 46A in respect of:
(a) if a dividend was paid to the shareholder by a company other than an exempting company, or by an exempting company and section 160APPA applies in relation to the dividend:
(i) the unfranked part of the dividend; or
(ii) any part of the dividend in respect of which a determination is made under paragraph 160AQCBA(3)(b) or 177EA(5)(b); or
(b) if a dividend was paid to the shareholder by an exempting company and section 160APPA does not apply in relation to the dividend--any part of the dividend.
Note: The heading to section 46F is replaced by the heading " Rebate not allowable for certain dividends ".
2 After section 46F
Insert:
46FA Deduction for dividends on - paid to non - resident owner
Allowable deduction
(1) An amount is allowable as a deduction from the assessable income of a company (the resident company ) if:
(a) the resident company is paid a dividend (the original dividend ) that:
(i) is paid by a company that is a resident; and
(ii) is a non - portfolio dividend; and
(iii) is not a fully - franked dividend; and
(b) the resident company is not a group company in relation to the company that paid the original dividend in relation to the year of income in which the dividend is paid; and
(c) but for subparagraph 46F(2)(a)(i), the resident company would be entitled to a rebate under section 46 in respect of the unfranked amount of the original dividend; and
(d) the resident company pays a dividend (the flow - on dividend ) to a company that is not a resident (the non - resident company ); and
(e) the flow - on dividend is not a fully - franked dividend; and
(f) the resident company declares that the unfranked amount of the flow - on dividend is an on - payment of the unfranked amount of the original dividend to the extent of a specified percentage (not exceeding 100%); and
(g) when the original dividend is paid, when the declaration is made and when the flow - on dividend is paid, the resident company is:
(i) a resident; and
(ii) wholly owned by the non - resident company.
The deduction is from assessable income of the year of income in which the flow - on dividend is paid. The amount of the deduction is equal to the flow - on amount worked out using subsection ( 2).
(2) The flow - on amount is:
Flow - on declarations
(3) The declaration under paragraph ( 1)(f) (the flow - on declaration ) must be made:
(a) in writing; and
(b) before the flow - on dividend is paid.
The declaration cannot be revoked or varied.
(4) The flow - on declaration is effective only to the extent to which the flow - on amount does not exceed the surplus in the resident company's unfranked non - portfolio dividend account immediately before the declaration is made.
Note: See section 46FB for the unfranked non - portfolio dividend account.
Effect of flow - on declaration on required franking amounts
(5) For the purposes of section 160APX, the class A and class C franked amounts of the flow - on dividend are taken to be increased as follows:
(a) if there is a class A required franking amount, but no class C required franking amount, for the flow - on dividend--the class A franked amount is taken to be increased by an amount equal to the flow - on amount;
(b) if there is a class C required franking amount, but no class A required franking amount, for the flow - on dividend--the class C franked amount is taken to be increased by an amount equal to the flow - on amount;
(c) if there are both a class A required franking amount and a class C required franking amount for the flow - on dividend:
(i) the class A franked amount is taken to be increased by an amount equal to so much of the flow - on amount as is necessary to have the flow - on dividend franked to the class A required franking amount; and
(ii) the class C franked amount is taken to be increased by an amount equal to the remainder (if any) of the flow - on amount.
For the purposes of this section, there is no class A or class C required franking amount if that amount is nil.
Wholly owned by non - resident company
(6) The resident company is wholly owned by the non - resident company if all the shares in the resident company are held by and beneficially owned by the non - resident company.
(7) However, the company is not wholly owned by the non - resident company if a person is in a position to affect rights, in relation to the resident company, of the non - resident company.
(8) The resident company is also not wholly owned by the non - resident company if at some future time a person will be in a position to affect rights as described in subsection ( 7).
A person in a position to affect rights
(9) A person is in a position to affect rights of a company in relation to another company if the person has a right, power or option:
(a) to acquire those rights from one or other of those companies; or
(b) to do something that would prevent one or other of those companies from exercising its rights for its own benefit, or from receiving any benefit arising from having those rights.
(10) It does not matter whether the person has the right, power or option because of the constitution of one or other of those companies, any agreement or otherwise.
Definitions
(11) In this section:
"fully-franked dividend" means a dividend whose franking percentage (within the meaning of section 160APA) is 100%.
"group company" has the same meaning as in section 160AFE.
"non-portfolio dividend" has the same meaning as in section 317.
"non-resident company" means a company that is not a resident.
"unfranked amount" for a dividend (including a dividend that is not a frankable dividend within the meaning of section 160APA) means so much of the dividend as has not been franked in accordance with section 160AQF or 160AQFA.
46FB Unfranked non - portfolio dividend account
Company may establish account
(1) A company may establish an unfranked non - portfolio dividend account.
Account surplus
(2) An unfranked non - portfolio dividend account surplus exists for a company at a particular time if the company's total unfranked non - portfolio dividend credits arising before that time exceed its total unfranked non - portfolio dividend debits arising before that time.
(3) The amount of the surplus is equal to the amount of the excess.
Credits
(4) An unfranked non - portfolio dividend credit arises for a company if:
(a) the company is paid an unfranked non - portfolio dividend; and
(b) the company is not a group company in relation to the company that paid the dividend in relation to the year of income in which the dividend is paid; and
(c) but for subparagraph 46F(2)(a)(i), the company would be entitled to a rebate under section 46 in respect of the unfranked amount of the dividend.
The amount of the credit is the unfranked amount of the dividend. The credit arises when the dividend is paid to the company.
Debits
(5) An unfranked non - portfolio dividend debit arises for a company if the company makes a declaration under paragraph 46FA(1)(f) in relation to a dividend paid on a particular day. The amount of the debit is the flow - on amount under subsection 46FA(2). The debit arises when the declaration is made.
Definitions
(6) In this section:
"group company" has the same meaning as in section 160AFE.
"non-portfolio dividend" has the same meaning as in section 317.
"unfranked amount" for a dividend (including a dividend that is not a frankable dividend within the meaning of section 160APA) means so much of the dividend as has not been franked in accordance with section 160AQF or 160AQFA.
Income Tax Assessment Act 1997
3 Section 12 - 5 (at the end of the table item relating to dividends)
Add:
unfranked non - portfolio dividends | 46FA |
4 Application of amendments
(1) The amendment made by item 1 applies to dividends paid on or after 1 July 2000.
(2) The amendments made by items 2 and 3 apply to unfranked non - portfolio dividends paid to the resident company on or after 1 July 2000.