Commonwealth Consolidated Acts

TAX LAWS AMENDMENT (2006 MEASURES NO. 4) ACT 2006 - SCHEDULE 3

Part   1 -- Main amendments

Income Tax Assessment Act 1997

1   After section   220 - 300

Insert:

Effect of NZ franking company making distribution that is non - assessable and non - exempt

220 - 350   Providing for a franking credit to arise

  (1)   This section has effect if:

  (a)   an * NZ franking company makes a * franked distribution to a company (the receiving company ); and

  (b)   the distribution does not * flow indirectly through the receiving company to another entity; and

  (c)   because of section   23AI, 23AJ or 23AK of the Income Tax Assessment Act 1936 :

  (i)   all of the distribution is * exempt income, or is * non - assessable non - exempt income, in the hands of the receiving company; or

  (ii)   part of the distribution is exempt income, or is non - assessable non - exempt income, in the hands of the receiving company.

  (2)   A * franking credit arises in the receiving company's * franking account on the day on which the distribution is made.

Note:   If only part of the distribution is exempt income or non - assessable non - exempt income:

(a)   a franking credit in relation to the distribution will arise under this section in relation to the part of the distribution that is exempt income, or that is non - assessable non - exempt income; and

(b)   another franking credit in relation to the distribution will arise under item   3 of the table in subsection 205 - 15(1) in relation to the part of the distribution that is not exempt income, or that is not non - assessable non - exempt income (see also subsection 207 - 90(2)).

  (3)   The amount of the * franking credit that so arises is:

  (a)   if subparagraph   (1)(c)(i) applies--the amount of the franking credit on the distribution made by the * NZ franking company; or

  (b)   if subparagraph   (1)(c)(ii) applies--so much of the franking credit on the distribution made by the NZ franking company as is attributable to the part of the distribution referred to in that subparagraph.

  (4)   The table in subsection 205 - 15(1) has effect subject to this section.

2   Application of amendment made by item   1

The amendment made by item   1 applies to distributions made on or after 1   April 2003.

Part   2 -- Consequential amendments

Income Tax Assessment Act 1936

3   At the end of subsection 128TB(1)

Add:

  ; or (e)   the following subparagraphs are satisfied in relation to a dividend paid to the company:

  (i)   an FDA credit arises for the company under section   128TA in relation to the dividend;

  (ii)   a franking credit arises in the company's franking account because of the application of section   220 - 350 of the Income Tax Assessment Act 1997 in relation to the dividend.

4   At the end of subsection 128TB(3)

Add:

  ; or (e)   in a paragraph   (1)(e) case--the amount of the franked part of the dividend.

5   Application of amendments made by items   3 and 4

The amendments made by items   3 and 4 apply to dividends paid on or after 1   April 2003.