Taxation Laws Amendment Act (No. 8) 2003 (107 of 2003)

Schedule 2   Various amendments relating to consolidated groups

Part 8   Excess franking deficit tax offsets

Income Tax Assessment Act 1997

39   At the end of Division 709

Add:

Subdivision 709-C - Treatment of excess franking deficit tax offsets when entity becomes a subsidiary member of a consolidated group

Guide to Subdivision 709-C

709-180 What this Subdivision is about

This Subdivision provides that any excess in the tax offset arising from a franking deficit tax liability of an entity that becomes a subsidiary member of a consolidated group is transferred to the head company of the group.

Table of sections

709-185 Joining entity's excess franking deficit tax offsets transferred to head company

709-190 Exit history rule not to treat leaving entity as having a franking deficit tax offset excess

709-185 Joining entity's excess franking deficit tax offsets transferred to head company

(1) This section operates if:

(a) an entity (the joining entity ) becomes a *subsidiary member of a *consolidated group at a time (the joining time ); and

(b) the joining entity is entitled to a *tax offset under section 205-70 for the income year that ends or, if subsection 701-30(3) applies, that is taken by subsection (3) of that section to end, at the joining time; and

(c) the offset exceeds (the excess being the joining entity's excess ) the amount that would have been the joining entity's income tax liability for that income year if it did not have that offset (but had all its other tax offsets).

Transfer of excess to head company

(2) For the purpose of applying subsection 205-70(1) to the *head company of the *consolidated group for the income year in which the joining time occurs:

(a) if the head company does not, after taking into account any application of this section to any other entity that became a *subsidiary member of the group before the joining time, have an excess mentioned in paragraph 205-70(1)(c) for the previous income year - the head company is taken to have an excess mentioned in that paragraph for the previous income year equal to the joining entity's excess; and

(b) if the head company does have such an excess - that excess is taken to be increased by the amount of the joining entity's excess.

Joining entity prevented from utilising excess in later income years

(3) For the purpose of applying subsection 205-70(1) to the joining entity for any income year after that in which the joining time occurs, the joining entity's excess is disregarded.

709-190 Exit history rule not to treat leaving entity as having a franking deficit tax offset excess

To avoid doubt, if:

(a) the *head company of a *consolidated group is entitled to a *tax offset under section 205-70 for an income year; and

(b) the offset exceeds the amount that would have been the head company's income tax liability for that income year if it did not have that offset (but had all its other tax offsets); and

(c) an entity ceases to be a *subsidiary member of the group in the income year;

the entity is not taken because of section 701-40 (the exit history rule):

(d) to have the excess mentioned in paragraph (b); or

(e) to have another excess of that kind because of the circumstances that caused the head company to have the excess.