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

Schedule 10   Trans-Tasman triangular imputation

Part 2   Related amendments

Division 4   Application and transitional provisions

Income Tax (Transitional Provisions) Act 1997

24   At the end of Part 3-6

Add:

Division 220 Imputation for NZ resident companies and related companies

Table of sections

220-1 Application to things happening on or after 1 April 2003

220-5 Residency requirement for income year including 1 April 2003

220-10 NZ franking company cannot frank before 1 October 2003

220-35 Extended time to make NZ franking choice

220-501 Franking and exempting accounts of new former exempting entities

220-1 Application to things happening on or after 1 April 2003

The following apply in relation to things happening on or after 1 April 2003, subject to this Division:

(a) Division 220 of the Income Tax Assessment Act 1997;

(b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997.

220-5 Residency requirement for income year including 1 April 2003

In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003.

220-10 NZ franking company cannot frank before 1 October 2003

An NZ franking company cannot:

(a) frank a distribution made before 1 October 2003; or

(b) frank with an exempting credit a distribution made before 1 October 2003.

[The next section is section 220-35.]

220-35 Extended time to make NZ franking choice

(1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company's income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year.

(2) Subsection (1) has effect despite paragraph 220-40(1)(a) of the Income Tax Assessment Act 1997.

[The next section is section 220-501.]

220-501 Franking and exempting accounts of new former exempting entities

(1) This section has effect if:

(a) a company (the Australian company ) that is an Australian resident becomes a former exempting entity at a time (the switch time ) because of:

(i) an NZ franking choice by a company (the NZ company ); and

(ii) Division 220 of the Income Tax Assessment Act 1997; and

(b) the NZ franking choice comes into force at the start of the NZ company's income year including 1 April 2003; and

(c) at the switch time there is a franking surplus in the Australian company's franking account; and

(d) at the switch time the Australian company is a 100% subsidiary of a company (the NZ parent company ) that:

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

(ii) is a post-choice NZ franking company; and

(e) there is a period for which all these requirements are met:

(i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time;

(ii) the Australian company must have been a 100% subsidiary of the NZ parent company for the whole of the period;

(iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period;

(iv) the NZ parent company must meet the condition in subsection (4) for the whole of the period.

Conditions relating to the Australian company

(2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208-25 to 208-45 of the Income Tax Assessment Act 1997 if:

(a) those sections and sections 220-505 and 220-510 of that Act had applied throughout the period; and

(b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post-choice NZ franking company if, at that time:

(i) the interest was held by, or indirectly for the benefit of, a company (the interest holder ); and

(ii) the interest holder was an NZ resident or would have been one had section 220-20 of the Income Tax Assessment Act 1997, and section 995-1 of that Act so far as it relates to section 220-20 of that Act, applied throughout the period.

(3) The other condition relating to the Australian company is that the company was a 100% subsidiary of a company that:

(a) was a listed public company; and

(b) was an NZ resident or would have been one had section 220-20 of the Income Tax Assessment Act 1997, and section 995-1 of that Act so far as it relates to section 220-20 of that Act, applied throughout the period.

Condition relating to the NZ parent company

(4) The condition relating to the NZ parent company is that it:

(a) was not a 100% subsidiary of another company that was a member of the same wholly-owned group; and

(b) was an NZ resident or would have been one had section 220-20 of the Income Tax Assessment Act 1997, and section 995-1 of that Act so far as it relates to section 220-20 of that Act, applied throughout the period.

Franking credits for the period remain franking credits

(5) A franking credit arises in the Australian company's franking account immediately after the switch time.

Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208-145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time.

Franking credits for the period do not become exempting credits

(6) An exempting debit arises in the Australian company's exempting account immediately after the switch time.

Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208-115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time.

Amount of franking credit and exempting debit

(7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table:

No franking credit or exempting debit in some cases

(8) Subsections (5) and (6) do not have effect if:

(a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and

(b) the franking surplus in the Australian company's franking account at the switch time is not greater than the franking surplus in the Australian company's franking account at the start of the period.