INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIAA - FRANKING OF DIVIDENDS  

Division 5 - Franking of dividends  

Subdivision A - Franking  

SECTION 160AQFA   WHAT CONSTITUTES FRANKING WITH AN EXEMPTED AMOUNT  

160AQFA(1)   Franking with class A exempted amount.  

If:

(a) a frankable dividend (the current dividend ) is paid by a former exempting company to a shareholder in that company; and

(b) the company is a resident at the time of payment; and

(c) where the current dividend is paid under a resolution:

(i) the company makes a declaration, before the reckoning day for the current dividend, that each dividend to which the resolution relates is a class A exempted dividend to the extent of a percentage (not exceeding 100%) specified in the declaration in relation to the dividend; and

(ii) the percentage so specified is the same for each of the dividends to which the resolution relates; and

(d) where the current dividend is not paid under a resolution - the company makes a declaration before the reckoning day for the current dividend that the current dividend is a class A exempted dividend to the extent of a percentage (not exceeding 100%) specified in the declaration;

the current dividend is taken to have been class A exempted to the extent of the amount calculated in accordance with the formula:

Current dividend   ×   Specified percentage

where:

current dividend
is the amount of the current dividend.

specified percentage
is the percentage specified in the declaration in relation to the dividend.

Note:

Because of subsection 46M(3) and paragraph 46M(4)(a) , paragraph (c) of this subsection does not apply to dividends that are taken by subsection 46M(3) or paragraph 46M(4)(a) not to be frankable dividends.

160AQFA(2)   Franking with class C exempted amount.  

If:

(a) a frankable dividend (the current dividend ) is paid by a former exempting company to a shareholder in that company; and

(b) the company is a resident at the time of payment; and

(c) if the current dividend is paid under a resolution:

(i) before the reckoning day for the current dividend, the company makes a declaration that each dividend to which the resolution relates is a class C exempted dividend to the extent of a percentage (not exceeding 100%) specified in the declaration in relation to the dividend; and

(ii) the percentage so specified is the same for each of the dividends to which the resolution relates; and

(d) if the current dividend is not paid under a resolution - the company makes a declaration before the reckoning day for the current dividend that the current dividend is a class C exempted dividend to the extent of a percentage (not exceeding 100%) specified in the declaration;

the current dividend is taken to have been class C exempted to the extent of the amount worked out using the formula:

Current dividend   ×   Specified percentage

where:

current dividend
means the amount of the current dividend.

specified percentage
means the percentage specified in the declaration in relation to the dividend.

Note:

Because of subsection 46M(3) and paragraph 46M(4)(a) , paragraph (c) of this subsection does not apply to dividends that are taken by subsection 46M(3) or paragraph 46M(4)(a) not to be frankable dividends.

160AQFA(3)   Limits on exempted amounts.  

Despite subsections (1) and (2), a dividend is taken not to have been class A exempted or class C exempted if the sum of:

(a) the class A exempted amount of the dividend; and

(b) the class C exempted amount of the dividend; and

(c) any class A franked amount of the dividend; and

(d) any class C franked amount of the dividend;

exceeds the amount of the dividend.

160AQFA(4)   Franking with exempted amounts limited to dividends on certain shares.  

A dividend is taken by subsection (1) or (2) to be class A exempted or class C exempted only to the extent (if any) to which it is paid to:

(a) an eligible continuing substantial shareholder; or

(b) an employee who acquired the share in respect of which the dividend is paid under an eligible employee share scheme.

160AQFA(5)   All dividends paid under resolution to be franked to same extent.  

A former exempting company is not entitled to make a declaration under subparagraph (1)(c)(i) or (2)(c)(i) specifying a percentage in relation to a dividend paid to a shareholder in the company unless it also makes a declaration under that subparagraph specifying the same percentage in relation to each other frankable dividend in the same combined class of dividends that it paid to a shareholder in the company.

160AQFA(6)   All dividends not paid under resolution to be franked to same extent.  

A former exempting company is not entitled to make a declaration under paragraph (1)(d) or (2)(d) specifying a percentage in relation to a dividend paid to a shareholder in the company unless it also makes a declaration under that paragraph specifying the same percentage in relation to each other frankable dividend in the same combined class of dividends that it paid during the same franking year to a shareholder in the company.

160AQFA(7)   Declaration to be irrevocable.  

A declaration made for the purposes of this section cannot be varied or revoked.

160AQFA(8)   Combined class of dividends.  

In this section:

combined class of dividends
has the meaning given by subsection 160AQG(1) .