INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)
If a company pays a dividend to a shareholder at a time when the company is a PDF, so much (if any) of the dividend as has not been franked in accordance with section 160AQF is exempt from income tax.
View history note
Hide history noteThe rest of this section applies to so much of the dividend as has been franked.
Subsections (2) to (8) (inclusive) apply if the assessable income of a year of income of a taxpayer who or that is:
(a) a company or a natural person (other than a company or natural person in the capacity of a trustee); or
(b) a corporate unit trust in relation to that year of income; or
(c) a public trading trust in relation to that year of income; or
(d) an eligible entity within the meaning of Part IX in relation to that year of income;
would (apart from subsection (2)) include:
(e) the franked amount of the dividend; or
(f) a trust amount or partnership amount in relation to the dividend in relation to which there would be a flow-on franking amount.
This subsection does not apply to cases dealt with in subsections (1C) and (1D).
If a taxpayer (other than a life assurance company) is entitled to a venture capital franking rebate in relation to the dividend under section 160ASEP , then:
(a) so much of the franked amount of the dividend as is venture capital franked is exempt income of the taxpayer; and
(b) the remaining franked amount is, subject to subsection (3), exempt income of the taxpayer.
If a life assurance company is entitled to a venture capital franking rebate in relation to the dividend under section 160ASEP , then:
(a) the amount worked out using the following formula is exempt income of the life assurance company:
| Venture capital franked amount | × |
CS/RA income
Total income |
where:
CS/RA income
is the amount of the life assurance company's assessable income for the year of income in which the dividend is received that is allocated to the CS/RA class of business under subsection
116CE(4)
.
total income
is the life assurance company's assessable income for the year of income in which the dividend is paid.
venture capital franked amount
has the meaning given by subsection (9); and
(b) the remaining franked amount is, subject to subsection (3), exempt income of the life assurance company.
Subject to subsection (3), the following is exempt income of the taxpayer:
(a) if paragraph (1B)(e) applies - the franked amount;
(b) if paragraph (1B)(f) applies - so much of the trust amount or partnership amount as would constitute the flow-on franking amount.
Paragraphs (1C)(b) and (1D)(b) and subsection (2) do not exempt, and are taken never to have exempted, an amount if the taxpayer's return of income of the year of income is prepared on the basis that the amount is included in the taxpayer's assessable income of that year.
If, apart from this subsection, a partnership amount in relation to which there would be a flow-on franking amount would be allowable as a deduction from the assessable income of a year of income of a taxpayer of a kind referred to in subsection (2), so much of the partnership amount as would constitute the flow-on franking amount is not allowable as a deduction from that assessable income.
124ZM(5) [Allowable deductions]Subsection (4) does not prevent, and is taken never to have prevented, an amount from being allowable as a deduction if the taxpayer's return of income of the year of income is prepared on the basis that the amount is so allowable.
124ZM(6) [Dividend derived by trustee]If, apart from this subsection, a trustee would be liable under section 98 , 99 or 99A to be assessed and pay tax on a trust amount or partnership amount in relation to which there would be a flow-on franking amount, the trustee is not liable under that section to be assessed and to pay tax on so much of the trust amount or partnership amount as would constitute the flow-on franking amount.
124ZM(7) [Election by trustee]Subsection (6) does not prevent, and is taken never to have prevented, the trustee from being liable under that section to be assessed and to pay tax on an amount if the trustee elects to be so liable.
124ZM(8) [Manner of election]An election must be made in the trustee's return of income of the trust estate for the year of income concerned.
124ZM(9) [Definitions]In this section:
flow-on franking amount
means:
(a) in relation to a trust amount - so much of the trust amount as is attributable to:
(i) if the franked amount is included in the assessable income of the trust estate - the franked amount; or
(ii) the flow-on franking amount in relation to another trust amount included in the assessable income of the trust estate; or
(iii) the flow-on franking amount in relation to a partnership amount included in, or allowable as a deduction from, the assessable income of the trust estate; and
(b) in relation to a partnership amount - so much of the partnership amount as is attributable to:
(i) if the franked amount is included in the assessable income of the partnership - the franked amount; or
(ii) the flow-on franking amount in relation to a trust amount included in the assessable income of the partnership.
franked amount
means so much of the dividend as has been franked in accordance with section
160AQF
.
partnership amount
has the same meaning as in Part
IIIAA
.
remaining franked amount
means:
(a) in a case where the taxpayer is not a life assurance company - so much of the franked amount of the dividend as exceeds the venture capital franked amount; and
(b) in a case where the taxpayer is a life assurance company - so much of the franked amount of the dividend as exceeds the amount worked out under paragraph (1D)(a).
trust amount
has the same meaning as in Part
IIIAA
.
venture capital franked amount
for a dividend means so much of the dividend as has been venture capital franked in accordance with section
160ASEL
.
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