Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 215 - Consequences of the debt/equity rules  

Subdivision 215-B - Non-share dividends that are unfrankable to some extent  

SECTION 215-25   Anticipating available frankable profits  

215-25(1)    

A *corporate tax entity that pays a *non-share dividend may anticipate *available frankable profits if:

(a) the entity:

(i) has announced the payment of; or

(ii) is committed or has resolved (formally or informally) to pay;

*distributions other than non-share dividends (the committed distributions ) after payment of the non-share dividend; and

(b) but for this subsection, section 215-15 would apply to the non-share dividend; and

(c) the entity ' s available frankable profits would be greater than nil at the relevant time if the committed distributions were ignored; and

(d) it is reasonable to expect that available profits will arise after payment of the non-share dividend and before payment of the committed distributions; and

(e) it is reasonable to expect that, having regard to the available profits mentioned in paragraph (d), the amount of the entity ' s *adjusted available frankable profits immediately after each of the committed distributions is paid will be greater than nil.

The available frankable profits immediately before the entity pays the non-share dividend is then the smallest of the amounts of the adjusted available frankable profits mentioned in paragraph (e).

215-25(2)    

The entity ' s adjusted available frankable profits immediately after a committed distribution is paid is the amount that would be its *available frankable profits at that time if all committed distributions to be paid after that time, and the *non-share dividend, were ignored.

215-25(3)    
A *franking debit arises for the entity if:

(a) the entity anticipates *available frankable profits under subsection (1); and

(b) the available frankable profits of the entity are less than nil:

(i) immediately after the last of the committed distributions is made; or

(ii) immediately before the end of the income year following the income year in which the *non-share dividend is paid;

whichever is earlier.

215-25(4)    
The *franking debit is equal to the lesser of:

(a) the amount by which the *available frankable profits is below nil; and

(b) the amount of the franked part of the *non-share dividend (worked out using subsection 215-20(2) ) or, if more than one non-share dividend is made at the relevant time, the sum of the amounts of the franked parts of those non-share dividends.

215-25(5)    
In working out the entity ' s *available frankable profits for the purposes of subsection (3) or (4), disregard:

(a) any *distributions that:

(i) the entity announces, or becomes committed to or resolves (formally or informally) to pay after the payment of the *non-share dividend; and

(ii) have not been paid; and

(b) any estimate made by the entity under subsection (1) after the non-share dividend is paid.