CHAPTER 4
-
INTERNATIONAL ASPECTS OF INCOME TAX
History
Chapter 4 inserted by No 162 of 2001.
PART 4-5
-
GENERAL
History
Part 4-5 inserted by No 162 of 2001.
Division 802
-
Foreign residents
'
income with an underlying foreign source
History
Div 802 inserted by No 147 of 2005, s 3 and Sch 2 item 1, applicable to income years starting on or after 1 July 2005. For additional application provisions see note under Subdiv
802-A
heading.
Subdivision 802-A
-
Conduit foreign income
History
Subdiv 802-A inserted by No 147 of 2005, s 3 and Sch 2 item 1, applicable to income years starting on or after 1 July 2005. No 147 of 2005, s 3 and Sch 2 items 27 and 28, contains the following additional application provisions:
27 Income years starting on 1 July 2005 or after that day and before Royal Assent
(1)
This item applies to an entity for whom an income year (the
first year
) starts:
(a)
on 1 July 2005; or
(b)
after that day and before the day on which this Act receives the Royal Assent
[
ie 14 December 2005].
(2)
The entity can only declare an amount to be conduit foreign income under Subdivision 802-A of the
Income Tax Assessment Act 1997
on or after the day on which this Act receives the Royal Assent.
(3)
An FDA surplus that exists for the entity under Subdivision
B
of Division
11A
of Part
III
of the
Income Tax Assessment Act 1936
at the end of the day before the day on which this Act receives the Royal Assent has effect as if it were the entity's conduit foreign income under Subdivision 802-A of the
Income Tax Assessment Act 1997
.
(4)
Any FDA credit under section
128TA
of the
Income Tax Assessment Act 1936
that arises during the period starting on 1 July 2005 and ending on the day before the day on which this Act receives the Royal Assent cannot also be conduit foreign income.
(5)
Section
802-40
of the
Income Tax Asssessment Act 1997
, as inserted by item 1, does not apply to the first year.
28 Later starting income years
(1)
This item applies to an entity for whom an income year (also the
first year
) starts on or after the day on which this Act receives the Royal Assent and before 1 July 2006.
(2)
The amendments made by items 7, 8, 9, 13 and 16, and 19 to 24 apply from the start of the first year.
(3)
An FDA surplus that exists for the entity under Subdivision
B
of Division
11A
of Part
III
of the
Income Tax Assessment Act 1936
at the start of the first year has effect as if it were the entity's conduit foreign income under Subdivision
802-A
of the
Income Tax Assessment Act 1997
.
...
Operative provisions
SECTION 802-60
No streaming of distributions
802-60(1)
Subsection (2) has effect if:
(a)
an *Australian corporate tax entity makes one or more *frankable distributions in a *franking period; and
(b)
at least one of the *distributions has an *unfranked part; and
(c)
the entity declares an amount of the unfranked part to be *conduit foreign income.
802-60(2)
If the entity does not, for that *franking period, declare the same proportion of *conduit foreign income for all *membership interests and *non-share equity interests then, instead of the amount that it declared to be conduit foreign income on those *distributions, it is taken to have declared under section
802-45
the greater amount that it would have declared had it declared that same proportion on all those distributions.
Note:
Breaching subsection (2) may make the entity subject to a penalty under section
288-80
in Schedule
1
to the
Taxation Administration Act 1953
(about over declaring conduit foreign income).
Example:
There are 10,000 membership interests in AusCo Limited, 7,500 held by foreign residents and 2,500 held by Australian residents. It has $1,800 of conduit foreign income.
AusCo makes an unfranked distribution of 50 cents per membership interest to all of its members. It declares $1,500 of the distribution to be conduit foreign income for its 7,500 foreign membership interests (20 cents per membership interest or 40% of each distribution) and none for its Australian membership interests.
AusCo is taken to have declared the same proportion (40% of each distribution) of conduit foreign income for its Australian membership interests (which amounts to $500 of conduit foreign income). It is therefore taken to have declared $2,000 of conduit foreign income. This is an over-declaration of $200 and a penalty under section
288-80
in Schedule
1
to the
Taxation Administration Act 1953
will apply.
802-60(3)
For the purposes of subsection (2), ignore *membership interests and *non-share equity interests that do not carry a right to receive *distributions (other than distributions on winding up).
802-60(4)
Despite subsection (2), an entity that receives a *frankable distribution that has an *unfranked part is entitled to rely on the *distribution statement made by the entity that made the distribution.
History
S 802-60 inserted by No 147 of 2005, s 3 and Sch 2 item 1, applicable to income years starting on or after 1 July 2005. For additional application provisions see note under Subdiv
802-A
heading.
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