Taxation Laws Amendment Act (No. 1) 2004 (101 of 2004)

Schedule 7   Imputation for life insurance companies

Income Tax (Transitional Provisions) Act 1997

9   Before Division 220

Insert:

Division 219 - Imputation for life insurance companies

Table of sections

219-40 Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002

219-45 Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002

219-40 Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002

(1) This section applies if:

(a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and

(b) the company's assessment day (the assessment day ) for that income year occurs on or after 1 July 2002; and

(c) the company has a franking account (the new franking account ) under section 205-10 of the Income Tax Assessment Act 1997.

(2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day:

Amount of the 1936 Act credit * (30 / 70)

where:

amount of the 1936 Act credit means the amount of the franking credit mentioned in paragraph (1)(a).

(3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219-15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002.

Note: On the assessment day, the franking credit mentioned in paragraph (1)(a) is therefore:

· reversed by the franking debit arising under subsection (2); and

· replaced with a franking credit arising under subsection (3).

219-45 Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002

(1) This section applies if:

(a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and

(b) the company's assessment day (the assessment day ) for that income year occurs on or after 1 July 2002; and

(c) the company has a franking account (the new franking account ) under section 205-10 of the Income Tax Assessment Act 1997.

(2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002:

Amount of the 1936 Act debit * (30 / 70)

where:

amount of the 1936 Act debit means the amount of the franking debit mentioned in paragraph (1)(a).

Note: As the effects of sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under section 160APVN before that date.