Taxation Laws Amendment Act (No. 6) 2003 (67 of 2003)

Schedule 10   Trans-Tasman triangular imputation

Part 1   Main amendment

Income Tax Assessment Act 1997

1   At the end of Part 3-6

Add:

[The next Division is Division 220.]

Division 220 Imputation for NZ resident companies and related companies

Table of Subdivisions

Guide to Division 220

220-A Objects of this Division

220-B NZ company treated as Australian resident for imputation system if company chooses

220-C Modifications of other Divisions of this Part

Guide to Division 220

220-1 What this Division is about

A company resident in New Zealand may choose that the imputation system apply in relation to it. If it does, the rest of this Part applies in relation to it as if it were an Australian resident company, but with modifications. Some of the modifications also affect:

(a) other companies that are members of the same wholly-owned group; or

(b) entities that receive distributions from the company resident in New Zealand.

Subdivision 220-A - Objects of this Division

Table of sections

220-15 Objects

220-20 What is an NZ resident ?

220-15 Objects

(1) The main objects of this Division are:

(a) to allow a company that is an *NZ resident to choose that the *imputation system apply in relation to it; and

(b) if the company makes that choice, to apply the rest of this Part in relation to the company generally as if it were an Australian resident.

(2) Another object of this Division is to prevent the benefits of the *imputation system from being inappropriately made available to or through a *member of a company that is a foreign resident, by modifying the way in which the rest of this Part applies to:

(a) a company that has chosen that the system apply in relation to it; and

(b) other companies that are members of the same *wholly-owned group as that company; and

(c) other entities that receive (directly or indirectly) *distributions from that company.

220-20 What is an NZ resident ?

Company

(1) A company is an NZ resident if:

(a) the company is incorporated in New Zealand; or

(b) the company is not incorporated in New Zealand but carries on business there and either:

(i) has its central management and control there; or

(ii) has its voting power controlled by *members who are NZ residents.

Natural person

(2) A natural person is an NZ resident if he or she resides in New Zealand.

(3) A natural person is also an NZ resident if his or her domicile is in New Zealand, unless the Commissioner is satisfied that the person's permanent place of abode is outside New Zealand.

(4) A natural person is also an NZ resident if he or she has actually been in New Zealand, continuously or intermittently, during more than half of the income year, unless the Commissioner is satisfied that:

(a) the person's usual place of abode is outside New Zealand; and

(b) the person does not intend to take up residence in New Zealand.

Not an NZ resident if an Australian resident

(5) A person is not an NZ resident if the person is an Australian resident. This has effect despite subsections (1), (2), (3) and (4).

Subdivision 220-B - NZ company treated as Australian resident for imputation system if company chooses

Table of sections

220-25 Application of provisions of Part 3-6 outside this Division

220-30 What is an NZ franking company ?

220-35 Making an NZ franking choice

220-40 When is an NZ franking choice in force?

220-45 Revoking an NZ franking choice

220-50 Cancelling an NZ franking choice

220-25 Application of provisions of Part 3-6 outside this Division

(1) The provisions of Part 3-6 outside this Division apply in relation to a company that is an *NZ franking company at a time as if it were an Australian resident at that time.

(2) They apply with the modifications made by the other sections of this Division.

220-30 What is an NZ franking company ?

A company is an NZ franking company at a time if, at the time, the company is an *NZ resident and has an *NZ franking choice in force.

220-35 Making an NZ franking choice

A company that is an *NZ resident may, by notice in the *approved form given to the Commissioner, choose that the *imputation system is to apply in relation to the company. The choice is an NZ franking choice .

220-40 When is an NZ franking choice in force?

(1) A company's *NZ franking choice comes into force:

(a) at the start of the company's income year in which the notice was given to the Commissioner; or

(b) at the start of a later income year specified in the notice.

(2) The *NZ franking choice continues in force until it is revoked by the company or cancelled by the Commissioner.

220-45 Revoking an NZ franking choice

(1) A company may revoke its *NZ franking choice by notice in the *approved form given to the Commissioner.

(2) To avoid doubt, the revocation takes effect when the notice is given to the Commissioner.

220-50 Cancelling an NZ franking choice

(1) The Commissioner may cancel a company's *NZ franking choice by written notice given to the company, but only if the Commissioner is satisfied that either:

(a) the company was liable to pay *franking deficit tax or *over-franking tax (whether or not because of section 220-800 (about joint and several liability for the tax)) and the company did not pay the tax by the day on which it was due and payable; or

(b) the company has not complied with subsection 214-15(2) or 214-20(2) (about giving the Commissioner a *franking return).

(2) To avoid doubt, the cancellation takes effect when the notice is given to the company.

Review of cancellation

(3) If the company is dissatisfied with the cancellation of the choice, it may object against the cancellation in the manner set out in Part IVC of the Taxation Administration Act 1953.

Note: That Part provides for review of the cancellation objected against.

Effect of cancelling a choice on making another choice in future

(4) If the company makes another *NZ franking choice, it does not come into force unless the Commissioner consents in writing to the choice coming into force.

(5) In consenting, the Commissioner may specify when the choice is to come into force. The consent has effect according to its terms, despite section 220-40.

(6) The Commissioner must give a copy of the consent to the company.

Subdivision 220-C - Modifications of other Divisions of this Part

Table of sections

Franking NZ franking companies' distributions

220-100 Residency requirement for franking

220-105 Unfrankable distributions by NZ franking companies

220-110 Maximum franking credit under section 202-60

NZ franking companies' franking accounts etc.

220-200 Keeping franking accounts in Australian currency

220-205 Franking credit for payment of NZ franking company's withholding tax liability

220-210 Effect of franked distribution to NZ franking company or flowing indirectly to NZ franking company

220-215 Effect on franking account if NZ franking choice ceases to be in force

Franking accounts of NZ franking company and some of its 100% subsidiaries

220-300 NZ franking company's franking account affected by franking accounts of some of its 100% subsidiaries

Effects of supplementary dividend from NZ franking company

220-400 Gross-up and tax offset for distribution from NZ franking company reduced by supplementary dividend

220-405 Deduction and reduced tax offset for franked distribution and supplementary dividend flowing indirectly

220-410 Franking credit reduced if tax offset reduced

Rules about exempting entities

220-500 Publicly listed post-choice NZ franking company and its 100% subsidiaries are not exempting entities

220-505 Post-choice NZ franking company is not automatically prescribed person

220-510 Parent company's status as prescribed person sets status of all other members of same wholly-owned group

NZ franking companies' exempting accounts

220-600 Keeping exempting accounts in Australian currency

220-605 Effect on exempting account if NZ franking choice ceases to be in force

Tax effect of distribution franked by NZ franking company with an exempting credit

220-700 Tax effect of distribution franked by NZ franking company with an exempting credit

Joint and several liability for NZ resident company's unmet franking liabilities

220-800 Joint and several liability for NZ resident company's franking tax etc.

Franking NZ franking companies' distributions

220-100 Residency requirement for franking

(1) An *NZ franking company satisfies the residency requirement when making a *distribution only if the distribution is made at least one month after the notice constituting the company's *NZ franking choice was given to the Commissioner.

Note: This section is relevant to both section 202-5 and section 208-60, which let a company frank a distribution, or frank a distribution with an exempting credit, only if the company satisfies the residency requirement when making the distribution.

(2) Section 202-20, as applying because of section 220-25, has effect subject to this section.

Note: Section 202-20 sets out how a company satisfies the residency requirement when making a distribution.

220-105 Unfrankable distributions by NZ franking companies

(1) These *distributions by an *NZ franking company are *unfrankable:

(a) a conduit tax relief additional dividend (as defined in section OB1 of the Income Tax Act 1994 of New Zealand);

(b) a supplementary dividend (as defined in that section).

(2) This section does not limit section 202-45 (about *unfrankable distributions).

220-110 Maximum franking credit under section 202-60

For the purposes of working out the *maximum franking credit for a *frankable distribution made by an *NZ franking company in a currency other than Australian currency, translate the amount of the distribution into Australian currency at the exchange rate applicable at the time of the decision to make the *distribution.

[The next section is section 220-200.]

NZ franking companies' franking accounts etc.

220-200 Keeping franking accounts in Australian currency

A *franking account of an *NZ franking company must be kept in Australian currency.

220-205 Franking credit for payment of NZ franking company's withholding tax liability

(1) A *franking credit arises in the *franking account of a company on the day a payment is made of *withholding tax that the company is liable under section 128B of the Income Tax Assessment Act 1936 to pay, if:

(a) because of section 220-25, the company satisfies the *residency requirement for the income year in which it derived the income on which it was liable to pay the withholding tax; and

(b) the company is a *franking entity for the whole or part of that income year.

The amount of the credit equals the amount of the payment.

(2) For the purposes of determining whether the company satisfies the *residency requirement for the income year described in paragraph (1)(a), section 205-25 has effect as if the derivation of the income described in that paragraph were an event specified in a relevant table for the purposes of that section.

220-210 Effect of franked distribution to NZ franking company or flowing indirectly to NZ franking company

No tax offset for NZ franking company

(1) An *NZ franking company to which a *franked distribution is made or *flows indirectly is not entitled under Division 207 to a *tax offset for the *distribution. That Division has effect subject to this section.

Denial of tax offset does not stop franking credit or debit arising

(2) However, subsection (1) does not prevent a *franking credit or *franking debit from arising in the *NZ franking company's *franking account under Division 205 or 208. To avoid doubt, the amount of the credit or debit, and the time at which it arises, are the same as they would be apart from subsection (1).

Note: This has the effect that the amount and timing of the credit or debit are worked out as if the NZ franking company had been entitled to the tax offset that subsection (1) prevents the company from being entitled to.

220-215 Effect on franking account if NZ franking choice ceases to be in force

(1) This section has effect if:

(a) a company has made an *NZ franking choice; and

(b) the choice is revoked or cancelled at a time (the end time ); and

(c) immediately before the end time the company is not an Australian resident.

Franking debit if franking surplus just before end time

(2) A *franking debit arises in the company's *franking account on the day during which the end time occurs if the account was in *surplus immediately before that time. The amount of the debit equals the *franking surplus.

Franking deficit tax if franking deficit just before end time

(3) If the company's *franking account was in *deficit immediately before the end time, subsection 205-45(3) applies in relation to the company as if it ceased to be a *franking entity at the end time.

Note: Subsection 205-45(3) makes an entity liable to pay franking deficit tax if the entity ceases to be a franking entity and had a franking deficit immediately before ceasing to be a franking entity.

(4) Subsection (3) does not limit the effect of subsection 205-45(3).

Take account of franking debit arising under section 220-605

(5) Take account of any *franking debit arising under section 220-605 because of the revocation or cancellation in working out for the purposes of this section whether the company's *franking account is in *surplus or *deficit immediately before the end time.

Note: Section 220-605 provides for a franking debit to arise in the company's franking account immediately before the end time if, immediately before the end time, the company was a former exempting entity and its exempting account was in deficit.

[The next section is section 220-300.]

Franking accounts of NZ franking company and some of its 100% subsidiaries

220-300 NZ franking company's franking account affected by franking accounts of some of its 100% subsidiaries

(1) This section has effect if all these conditions are met in relation to a company (the franking donor company ) at a time:

(a) the franking donor company is at the time:

(i) an Australian resident or a *post-choice NZ franking company; and

(ii) a *100% subsidiary of a post-choice NZ franking company (the parent company ) that is not a 100% subsidiary of another company that is a member of the same *wholly-owned group as the parent company;

(b) the franking donor company is at the time a 100% subsidiary of a post-choice NZ franking company (the NZ recipient company ) in relation to which these requirements are met:

(i) there must be no companies that are *NZ residents and 100% subsidiaries of the NZ recipient company interposed between it and the franking donor company;

(ii) the NZ recipient company must be either the parent company or a 100% subsidiary of the parent company;

(c) there are interposed between the NZ recipient company and the franking donor company at the time one or more companies, each of which:

(i) is a 100% subsidiary of the NZ recipient company; and

(ii) is neither an Australian resident nor an NZ resident.

What is a post-choice NZ franking company ?

(2) A company is a post-choice NZ franking company at a time if:

(a) at the time, the company is an *NZ franking company; and

(b) the notice constituting the *NZ franking choice that makes the company an NZ franking company at the time was given to the Commissioner at or before the time.

Franking donor company's franking surplus when conditions met

(3) If the franking donor company's *franking account is in *surplus at the first time all the conditions in subsection (1) are met:

(a) a *franking debit equal to the surplus arises in the franking donor company's franking account immediately after that time; and

(b) a *franking credit equal to the surplus arises in the NZ recipient company's franking account immediately after that time.

Franking donor company's franking deficit when conditions met

(4) If the franking donor company's *franking account is in *deficit at the first time all the conditions in subsection (1) are met, subsection 205-45(3) applies in relation to the franking donor company as if:

(a) it ceased to be a *franking entity at that time; and

(b) its franking account had been in deficit to the same extent immediately before that cessation.

Note: Subsection 205-45(3) makes an entity liable to pay franking deficit tax if the entity ceases to be a franking entity and had a franking deficit immediately before ceasing to be a franking entity.

NZ recipient company's franking account after conditions are met

(5) If, apart from paragraph (a), a *franking credit or *franking debit would arise in the franking donor company's *franking account at a time (the accounting time ) that is a time when all the conditions in subsection (1) are met but after the first time at which all those conditions are met in relation to the franking donor company:

(a) the credit or debit does not arise in the franking donor company's franking account; and

(b) a credit or debit of the same amount arises at the accounting time in the NZ recipient company's franking account instead.

(6) However, subsection (5) does not apply in relation to:

(a) a *franking debit arising in the franking donor company's *franking account under subsection (3); or

(b) a *franking credit arising in that account because of item 5 of the table in section 205-15 in conjunction with subsection (4) of this section; or

(c) a franking debit arising in that account under paragraph 220-605(3)(a).

Note 1: Item 5 of the table in section 205-15 gives rise to a franking credit immediately after a liability to franking deficit tax arises. Subsection (4) of this section causes such a liability to arise under section 205-45.

Note 2: Paragraph 220-605(3)(a) gives rise to a franking debit if the NZ franking choice of a company that is a former exempting entity is revoked or cancelled and the company's exempting account is in deficit immediately before the revocation or cancellation.

Franking donor company's benchmark franking percentage

(7) Subsection (5) does not affect the franking donor company's *benchmark franking percentage.

Special rules if franking donor company is former exempting entity

(8) If the franking donor company becomes a *former exempting entity at the first time all the conditions in subsection (1) are met:

(a) subsections (3) and (4) do not apply; and

(b) subsection (5) does not apply in relation to:

(i) a *franking credit arising in the franking donor company's *franking account under item 1 of the table in section 208-130 immediately after that time; or

(ii) a *franking debit arising in the franking donor company's franking account under item 1 of the table in section 208-145 immediately after that time.

Note: Subsection (8) ensures that the franking donor company's franking account has a nil balance immediately after the company becomes a former exempting entity and that there is an appropriate balance in the company's exempting account that is not made available for use by the NZ recipient company in franking distributions.

[The next section is section 220-400.]

Effects of supplementary dividend from NZ franking company

220-400 Gross-up and tax offset for distribution from NZ franking company reduced by supplementary dividend

(1) This section has effect if:

(a) an *NZ franking company:

(i) makes a *franked distribution to an entity (the recipient ) in an income year; and

(ii) pays a supplementary dividend (as defined in section OB1 of the Income Tax Act 1994 of New Zealand) to the recipient in connection with the franked distribution; and

(b) under section 207-20:

(i) an amount is included in the recipient's assessable income for the income year; and

(ii) the recipient is entitled to a *tax offset for the income year; and

(c) the recipient is entitled under section 160AF (Credits in respect of foreign tax) of the Income Tax Assessment Act 1936 to a credit because of the inclusion of the *distribution in the recipient's assessable income for the income year; and

(d) the recipient's income tax for the income year is reduced to some extent on account of the credit.

Reduced gross-up

(2) The amount included in the recipient's assessable income is reduced by the amount of the supplementary dividend (but not below zero).

Reduced tax offset

(3) The amount of the *tax offset is reduced by the amount of the supplementary dividend (but not below zero).

Amount of gross-up and tax offset in case of manipulation

(4) If subsection 207-145(2) applies in relation to the recipient as the entity mentioned in that subsection, it has effect as if the amount of the *franking credit were equal to the amount of the *tax offset after reduction under subsection (3) of this section.

Note: Subsection 207-145(2) reduces the amount included in an entity's assessable income, and the amount of the tax offset to which the entity is entitled, under section 207-20 if the Commissioner determines that no franking credit benefit is to arise for part of a franked distribution to the entity.

Relationship with sections 207-20 and 207-145

(5) Sections 207-20 and 207-145 have effect subject to this section.

220-405 Deduction and reduced tax offset for franked distribution and supplementary dividend flowing indirectly

(1) This section has effect if:

(a) an *NZ franking company:

(i) makes a *franked distribution; and

(ii) pays a supplementary dividend (as defined in section OB1 of the Income Tax Act 1994 of New Zealand) in connection with the franked distribution; and

(b) the franked distribution and the supplementary dividend *flow indirectly to an entity (the recipient ) in an income year because the recipient is a partner in a partnership or a beneficiary or trustee of a trust; and

(c) the recipient is entitled under section 207-50 to a *tax offset in connection with the *distribution; and

(d) the recipient is entitled under section 160AF (Credits in respect of foreign tax) of the Income Tax Assessment Act 1936 to a credit for the income year because of the distribution; and

(e) the recipient's income tax for the income year is reduced to some extent on account of the credit.

(2) The supplementary dividend flows indirectly to an entity if, had the supplementary dividend been a *franked distribution, it would have *flowed indirectly to the entity under section 207-35.

Deduction for recipient

(3) The recipient can deduct for the income year the amount worked out using the formula:

Amount of the supplementary dividend * (Recipient's share of the net income of the partnership or trust / Net income of the partnership or trust)

Amount of recipient's tax offset

(4) Work out the amount of the recipient's *tax offset using the formula:

(Amount of the franking credit on the franked distribution - Amount of the supplementary dividend) * (Recipient's share of the net income of the partnership or trust / Net income of the partnership or trust)

However, the amount of the tax offset is nil if the amount of the supplementary dividend is greater than the amount of the franking credit on the franked distribution.

Reduction of amount on which trustee recipient is assessed

(5) If the recipient:

(a) is the trustee of a trust; and

(b) is liable under section 98, 99 or 99A of the Income Tax Assessment Act 1936 to be assessed on a share of the *net income, the net income or a part of the net income, of the trust;

the amount on which the recipient is liable to be assessed is reduced by the amount worked out using the formula:

Amount of the supplementary dividend * (Amount on which the recipient would be assessed apart from this section / Net income of the trust)

Tax offset if recipient is trustee who is assessed

(6) Despite subsection (4), work out the amount of the recipient's *tax offset using the formula if the recipient:

(a) is the trustee of a trust; and

(b) is liable under section 98, 99 or 99A of the Income Tax Assessment Act 1936 to be assessed on a share of the *net income, the net income or a part of the net income, of the trust;

(Amount of the franking credit on the franked distribution - Amount of the supplementary dividend) * (Amount on which the recipient would be assessed apart from this section / Net income of the trust)

However, the amount of the tax offset is nil if the amount of the supplementary dividend is greater than the amount of the franking credit on the franked distribution.

Amount of tax offset in case of manipulation

(7) If paragraph 207-150(2)(b) applies in relation to the recipient as the entity mentioned in that paragraph, it has effect as if the amount of the entity's *share of the *franking credit on the distribution were equal to the amount of the *tax offset worked out for the recipient under this section.

Note: Paragraph 207-150(2)(b) reduces the amount of a tax offset an entity is entitled to under section 207-50 for a franked distribution flowing indirectly to the entity if the Commissioner determines that no franking credit benefit is to arise for part of the distribution.

Relationship with Subdivisions 207-B and 207-F

(8) Subdivisions 207-B and 207-F have effect subject to this section.

Note: Subdivision 207-B provides for an entitlement to a tax offset for a franked distribution flowing indirectly to an entity. Subdivision 207-F provides for reducing the amount of the offset if the Commissioner determines that no franking credit benefit is to arise for part of the distribution.

220-410 Franking credit reduced if tax offset reduced

(1) If, under section 220-400 or 220-405, a *corporate tax entity's *tax offset (the reduced tax offset ) for the *franked distribution described in that section is less than it would be apart from that section, the *franking credit arising in that entity's *franking account because of the *distribution is equal to the reduced tax offset.

(2) Items 3 and 4 of the table in section 205-15 have effect subject to this section.

Note: Items 3 and 4 of the table in section 205-15 give rise to a franking credit for a franked distribution if the recipient is entitled under Division 207 to a tax offset for the distribution. Those items provide that the amount of the credit equals the amount of that offset.

[The next section is section 220-500.]

Rules about exempting entities

220-500 Publicly listed post-choice NZ franking company and its 100% subsidiaries are not exempting entities

(1) A company is not an *exempting entity at a particular time if:

(a) it is a *post-choice NZ franking company at the time; and

(b) the company is a *listed public company at the time.

(2) A company (the non-exempting company ) is not an *exempting entity at a particular time if at the time:

(a) the non-exempting company is a *100% subsidiary of a company (the listed company ) that is not an exempting entity because of subsection (1); and

(b) the non-exempting company is an Australian resident or a *post-choice NZ franking company; and

(c) if:

(i) there are one or more companies interposed between the non-exempting company and the listed company; and

(ii) one or more of the interposed companies are *NZ residents;

all of the interposed companies that are NZ residents are post-choice NZ franking companies.

(3) This section has effect despite section 208-20 (about an entity being an *exempting entity).

220-505 Post-choice NZ franking company is not automatically prescribed person

(1) A *post-choice NZ franking company is not a prescribed person under section 208-40 for the purposes of working out whether another *corporate tax entity is an *exempting entity at a particular time because it is effectively owned by prescribed persons within the meaning of section 208-25.

(2) However, this section does not prevent the company from being taken under section 208-45 to be a prescribed person for those purposes.

220-510 Parent company's status as prescribed person sets status of all other members of same wholly-owned group

(1) This section has effect for the purposes of working out whether a company is an *exempting entity at a particular time because it is effectively owned by prescribed persons within the meaning of section 208-25, if:

(a) at the time the company is a *100% subsidiary of another company (the parent company ) that is not a 100% subsidiary of another member of the same *wholly-owned group; and

(b) at the time the parent company is a *post-choice NZ franking company; and

(c) there is at least one company (the non-Tasman company ) that meets all these conditions:

(i) the non-Tasman company is neither an Australian resident nor an *NZ resident at the time;

(ii) the non-Tasman company is a member of the same wholly-owned group at the time;

(iii) the non-Tasman company is interposed between the parent company and a company that, at the time, is an Australian resident or a post-choice NZ franking company.

(2) At the time, each company that is a *100% subsidiary of the parent company is a prescribed person if the parent company is a prescribed person at the time for those purposes because of section 208-40 or 208-45 (taking account of section 220-505, if relevant).

(3) At the time, each company that is a *100% subsidiary of the parent company is not a prescribed person if the parent company is not a prescribed person for those purposes because of section 208-40 or 208-45 (taking account of section 220-505, if relevant).

(4) This section has effect despite sections 208-40, 208-45 and 220-505 so far as those sections apply in relation to a *100% subsidiary of the parent company.

[The next section is section 220-600.]

NZ franking companies' exempting accounts

220-600 Keeping exempting accounts in Australian currency

An *exempting account of an *NZ franking company must be kept in Australian currency.

220-605 Effect on exempting account if NZ franking choice ceases to be in force

(1) This section has effect if:

(a) a company has made an *NZ franking choice; and

(b) the choice is revoked or cancelled at a time (the end time ); and

(c) immediately before the end time:

(i) the company is not an Australian resident; and

(ii) the company is a *former exempting entity.

Exempting debit if exempting surplus just before end time

(2) An *exempting debit arises in the company's *exempting account at the end time if the account was in *surplus immediately before that time. The amount of the debit equals the *exempting surplus.

If exempting deficit just before end time

(3) If the company's *exempting account was in *deficit immediately before the end time:

(a) a *franking debit equal to that deficit arises in the company's *franking account immediately before the end time; and

(b) an *exempting credit equal to that deficit arises in the company's exempting account at the end time.

[The next section is section 220-700.]

Tax effect of distribution franked by NZ franking company with an exempting credit

220-700 Tax effect of distribution franked by NZ franking company with an exempting credit

(1) This section has effect if an *NZ franking company *franks with an exempting credit a *distribution the company makes when it is a *former exempting entity.

(2) If, under Subdivision 208-H, Division 207 applies in relation to the *distribution, it applies subject to the provisions of this Division that modify the effect of that Division.

Note 1: Subdivision 208-H provides in some cases for the tax effect of a distribution franked with an exempting credit by applying Division 207 as if the distribution were a franked distribution.

Note 2: Sections 220-400 and 220-405 modify the effect of Division 207 so far as it relates to the tax effect of distributions by NZ franking companies that pay supplementary dividends in connection with the distributions.

(3) Subdivision 208-H has effect subject to this section.

[The next section is section 220-800.]

Joint and several liability for NZ resident company's unmet franking liabilities

220-800 Joint and several liability for NZ resident company's franking tax etc.

(1) This section has effect if:

(a) a company (the defaulter ) became liable under another section to pay an amount described in subsection (2) because the company was an *NZ franking company; and

(b) the amount was unpaid by the time (the defaulter's due time ) it was due and payable by the defaulter; and

(c) at any time during the period for the amount (see subsection (2)), the defaulter was a member of the same *wholly-owned group as one or more other companies (each of which is a contributor ).

(2) For the purposes of subsection (1), the amount and period are shown in the table:

(3) Just after the defaulter's due time, these companies become jointly and severally liable to pay the unpaid amount:

(a) the defaulter;

(b) each contributor, other than one that, at that time:

(i) is neither an Australian resident nor an *NZ resident; or

(ii) is prohibited by an *Australian law or a law of New Zealand from entering into an *arrangement that would make the contributor jointly or severally liable for the unpaid amount.

(4) The joint and several liability of a particular contributor becomes due and payable by the contributor 14 days after the Commissioner gives it written notice of the liability.

Note 1: Two or more contributors will have different due and payable dates for the same liability if the Commissioner gives them notice of their liability on different days.

Note 2: This section does not affect the time at which the liability for the unpaid amount arose for, or became due and payable by, the defaulter.

(5) If:

(a) the unpaid amount (the first interest amount ) is *general interest charge for a day in relation to another unpaid amount (the primary liability ) that consists of *franking deficit tax or *over-franking tax; and

(b) on a day the Commissioner gives a particular contributor written notice under subsection (4) of the contributor's liability for the first interest amount; and

(c) general interest charge arises:

(i) for a day (the later day ) after the days mentioned in paragraphs (a) and (b); and

(ii) in relation to the primary liability; and

(d) the general interest charge for the later day has not been paid or otherwise discharged in full by the time it became due and payable;

the Commissioner is taken to have given the contributor written notice under subsection (4) of the general interest charge for the later day on that later day.

(6) Section 254 of the Income Tax Assessment Act 1936 applies in relation to the contributors' liability as if it were a liability for tax.

Note: Section 254 of the Income Tax Assessment Act 1936 deals with the payment of tax by agents and trustees.

[The next Division is Division 240.]