Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 207 - Effect of receiving a franked distribution  

Subdivision 207-E - Exceptions to the rules in Subdivision 207-D  

Exempt institutions

SECTION 207-130   Controller ' s liability  

207-130(1)    
A *controller (for imputation purposes) of an entity (the controlled entity ) is liable to pay an amount under this section in respect of a refund paid to the controlled entity under Division 67 if:

(a) the controlled entity claimed the refund wholly or partly on the basis that:

(i) the controlled entity was entitled to a *tax offset under section 207-20 , 207-45 or 207-110 in relation to a *franked distribution; and

(ii) the controlled entity was an *exempt institution that is eligible for a refund; and

(b) because of the operation of section 207-120 , 207-122 , 207-124 or 207-126 in respect of a *distribution event or an *arrangement in relation to the distribution, the controlled entity is not entitled to the tax offset; and

(c) the controller or an *associate of the controller benefited from that event or arrangement; and

(d) some or all of the amount that the controlled entity is liable to pay in respect of the refund remains unpaid after the day on which the amount becomes due and payable; and

(e) the Commissioner gives the controller written notice:

(i) stating that the controller is liable to pay an amount under this section; and

(ii) specifying that amount.

Except as provided for in subsection (5), this subsection does not affect any liability the controlled entity has in relation to the refund.

Note 1:

Section 207-134 also provides that the controlled entity ' s present entitlement to a trust share amount is disregarded for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 .

Note 2:

For when paragraph (c) is satisfied, see also subsection 207-132(3) .

207-130(2)    
The amount that the *controller (for imputation purposes) is liable to pay under subsection (1):

(a) is the amount specified under subparagraph (1)(e)(ii); and

(b) becomes due and payable at the end of the period of 14 days that starts on the day on which the notice mentioned in paragraph (1)(e) is given.

207-130(3)    
The amount that the *controller (for imputation purposes) is liable to pay under subsection (1) must not exceed the total amount or value of the benefit that the controller and its *associates obtained from the *distribution event or *arrangement.

207-130(4)    
The total of:

(a) the amounts that the Commissioner recovers under subsection (1) in relation to the refund from all of the controlled entity ' s *controllers (for imputation purposes); and

(b) the amounts that the Commissioner recovers in relation to the refund from the controlled entity;

must not exceed the amount that the controlled entity was liable to pay as mentioned in paragraph (1)(d).

Controller of a company

207-130(5)    
An entity is a controller (for imputation purposes) of a company if the entity is a *controller of the company (for CGT purposes).

Controller of an entity other than a company - basic meaning

207-130(6)    
Subject to subsections (7) and (8), an entity is a controller (for imputation purposes) of an entity other than a company (the controlled entity ) if:

(a) a group in relation to the entity has the power, by means of the exercise of a power of appointment or revocation or otherwise, to obtain beneficial enjoyment (directly or indirectly) of the capital or income of the controlled entity; or

(b) a group in relation to the entity is able (directly or indirectly) to control the application of the capital or income of the controlled entity; or

(c) a group in relation to the entity is capable, under a *scheme, of gaining the beneficial enjoyment mentioned in paragraph (a) or the control mentioned in paragraph (b); or

(d) the controlled entity or, if the controlled entity is a trust, the trustee of the trust:

(i) is accustomed; or

(ii) is under an obligation; or

(iii) might reasonably be expected;

to act in accordance with the directions, instructions or wishes of a group in relation to the entity; or

(e) if the controlled entity is a trust - a group in relation to the entity is able (directly or indirectly) to remove or appoint the trustee of the trust; or

(f) a group in relation to the entity has *more than a 50% stake in the income or capital of the controlled entity; or

(g) entities in a group in relation to the entity are the only entities that, under the terms of:

(i) the constitution of the controlled entity or the terms on which the controlled entity is established; or

(ii) if the controlled entity is a trust - the terms of the trust;

can obtain the beneficial enjoyment of the income or capital of the controlled entity.

Group in relation to an entity

207-130(7)    

For the purposes of subsection (6), each of the following constitutes a group in relation to an entity:

(a) the entity acting alone;

(b) an *associate of the entity acting alone;

(c) the entity and one or more associates of the entity acting together;

(d) 2 or more associates of the entity acting together.

Commissioner ' s power to take an entity not to be a controller (for imputation purposes)

207-130(8)    
If:

(a) at a particular time, an entity (the first entity ) would, but for this subsection, be a *controller (for imputation purposes) of an entity other than a company (the second entity ); and

(b) the Commissioner, having regard to all relevant circumstances, considers that it is reasonable that the first entity be taken not to be such a controller of the second entity at the particular time;

the first entity is taken not to be a controller (for imputation purposes) of the second entity at the particular time.

207-130(9)    
Without limiting paragraph (8)(b), if the second entity is a trust, the Commissioner may have regard under that paragraph to the identity of the beneficiaries of the trust at any time (whether before or after the first entity began to be a *controller (for imputation purposes) of the second entity).