INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIAA - FRANKING OF DIVIDENDS  

Division 2 - Franking surplus or deficit  

Subdivision C - General provisions on franking debits  

SECTION 160AQCBA   FURTHER PROVISIONS RELATING TO DIVIDEND STREAMING  

160AQCBA(1)   Definitions.  

In this section, unless the contrary intention appears:

advantaged shareholders
has the meaning given by subsection (2).

franking credit benefit
has the meaning given by subsection (16).

giving a benefit to a shareholder
has a meaning affected by subsection (15).

greater benefit from franking credits
has a meaning affected by subsection (17).

160AQCBA(2)   Application of section.  

This section applies in respect of a company that, whether in the same franking year or in different franking years, streams the payment of dividends, or the payment of dividends and the giving of other benefits, to its shareholders in such a way that:

(a) franking credit benefits are, or apart from this section would be, received by shareholders ( advantaged shareholders ) who would, in the year of income in which the dividends are paid, derive a greater benefit from franking credits than other shareholders; and

(b) the other shareholders ( disadvantaged shareholders ) will receive lesser franking credit benefits or will not receive any franking credit benefits, whether or not they receive any other benefits.

160AQCBA(2A)   [Streaming of venture capital franking rebate]  

This section applies to the streaming of venture capital franking rebate benefits as if:

(a) references to a franking debit include references to a venture capital debit; and

(b) references to the franked amount of the dividend include references to the venture capital franked amount of the dividend.

160AQCBA(3)   Commissioner to determine franking debit or deny franking credit.  

The Commissioner may make, in writing, either of the following determinations:

(a) a determination that a franking debit or an exempting debit of the company arises in respect of each dividend or other benefit paid or given to a disadvantaged shareholder;

(b) a determination that no franking credit benefit is to arise in respect of any dividend paid to an advantaged shareholder.

A determination does not form part of an assessment.

160AQCBA(3A)   [Payment of non-share dividends]  

If:

(a) a company pays non-share dividends in respect of non-share equity interests held by particular shareholders (the disadvantaged shareholders ); and

(b) the non-share dividends are not frankable dividends because of paragraph (ga) of the definition of frankable dividend in section 160APA ;

the Commissioner must not make a determination under subsection (3) in reliance on the fact that the disadvantaged shareholders do not obtain franking credit benefits in respect of the non-share dividends.

160AQCBA(3B)   [Sec 3A does not apply]  

Subsection (3A) does not apply if the Commissioner is satisfied, having regard to all the relevant circumstances, that the company issued the non-share equity interests, or allowed them to remain on issue, for the purpose of ensuring that:

(a) the disadvantaged shareholders would receive no franking credit benefits; or

(b) other shareholders would receive franking credit benefits.

That purpose need not be the dominant purpose for issuing the interests or allowing them to remain on issue but must be more than a merely incidental purpose.

160AQCBA(3C)   [Relevant circumstances]  

Without limiting subsection (3B), the following are relevant circumstances for the purposes of that subsection:

(a) the company's reason for issuing the non-share equity interests or allowing them to remain on issue;

(b) the commercial benefit the company obtained by issuing the non-share equity interests or allowing them to remain on issue;

(c) whether the company may pay franked dividends in respect of interests that are, from a commercial point of view, similar to the non-share equity interests.

160AQCBA(4)   Notice of determination.  

If the Commissioner makes a determination under subsection (3), the Commissioner must:

(a) in respect of a determination made under paragraph (3)(a) - serve notice in writing of the determination on the company; or

(b) in respect of a determination made under paragraph (3)(b) - serve notice in writing of the determination on the advantaged shareholder.

The notice may be included in a notice of assessment.

160AQCBA(5)   Publication in national newspaper of determination in relation to listed public company denying franking credit benefit.  

If the Commissioner makes a determination under paragraph (3)(b), in respect of a dividend paid by a listed public company within the meaning of the Income Tax Assessment Act 1997 , the Commissioner is taken to have served notice in writing of the determination on the advantaged shareholder if the Commissioner causes the notice to be published in a daily newspaper that circulates generally in each State, the Australian Capital Territory and the Northern Territory. The notice is taken to have been served on the day on which the publication takes place.

160AQCBA(6)   Evidence of determination.  

The production of:

(a) a notice of a determination; or

(b) a document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of a determination;

is conclusive evidence of:

(c) the due making of the determination; and

(d) except in proceedings under Part IVC of the Taxation Administration Act 1953 on an appeal or review relating to the determination, that the determination is correct.

160AQCBA(7)   Objections.  

If a taxpayer to whom a determination relates is dissatisfied with the determination, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953 .

160AQCBA(8)   Effect of determination of franking debit or exempting debit.  

If the Commissioner makes a determination under paragraph (3)(a):

(a) on the day on which notice of the determination is served in writing on the company, a franking debit or exempting debit of the company arises in respect of the dividend or other benefit; and

(b) the amount of the franking debit or exempting debit is worked out in accordance with subsections (9) to (13).

160AQCBA(9)   Franking debit or exempting debit in respect of partly franked dividend.  

In the case of a franking debit or exempting debit in respect of a partly franked or partly exempted dividend, the amount of the franking debit or exempting debit is the difference between the franked amount or the exempted amount and the amount that would have been the franked amount or exempted amount if the dividend had been franked to the maximum extent to which the dividends paid to the advantaged shareholders were franked.

160AQCBA(10)   Franking debit in respect of unfranked dividend.  

In the case of a franking debit in respect of an unfranked dividend, the amount of the franking debit is the amount that would have been the franked amount if the dividend had been franked to the maximum extent to which the dividends paid to the advantaged shareholders were franked.

160AQCBA(10A)   Exempting debit in respect of dividend that has not been franked in accordance with section 160AQFA .  

In the case of an exempting debit in respect of a dividend that has not been franked in accordance with section 160AQFA , the amount of the exempting debit is the amount that would have been the franked amount if the dividend had been franked to the maximum extent to which the dividends paid to the advantaged shareholders were franked.

160AQCBA(11)   Franking debit or exempting debit in respect of bonus shares from share premium account.  

In the case of a franking debit or exempting debit in respect of a benefit by way of the issue of bonus shares from a share premium account, the amount of the franking debit or exempting debit is the amount that, if the company had paid a dividend of an amount equal to the amount debited to the share premium account in respect of the bonus shares and had franked the dividend to the maximum extent to which the dividends paid to the advantaged shareholders were franked, would have been the franked amount of the dividend.

160AQCBA(12)   Franking debit or exempting debit in respect of any other benefit.  

In the case of a franking debit or exempting debit in respect of any other benefit, the amount of the franking debit or exempting debit is the amount that, if the company had paid a dividend of an amount equal to the value of the benefit at the time when it was paid and had franked the dividend to the maximum extent to which the dividends paid to the advantaged shareholders were franked, would have been the franked amount of the dividend.

160AQCBA(13)   Franking debit to be reduced by any franking debit under section 160AQCB.  

If:

(a) a franking debit of the company arises under paragraph (8)(a) in respect of a dividend or other benefit; and

(b) a franking debit of the company arises under section 160AQCB in respect of the same dividend or other benefit;

the amount of the franking debit arising under paragraph (8)(a) is reduced by the amount of the franking debit arising under section 160AQCB .

160AQCBA(14)   Effect of determination that no franking credit benefit is to arise.  

If the Commissioner makes a determination under paragraph (3)(b), the determination has effect according to its terms.

160AQCBA(15)   Meaning of giving a benefit to a shareholder .  

A reference to giving a benefit to a shareholder in a company includes, but is not limited to, a reference to any of the following:

(a) the issue to the shareholder of bonus shares in the company;

(b) the return to the shareholder of paid-up share capital in the company;

(c) the forgiveness of a debt owed by the shareholder to the company;

(d) the making of a payment of any kind, or the giving of any property, to the shareholder or to another person on the shareholder's behalf, whether the payment is made or the property is given by the company or another person.

160AQCBA(16)   Where franking credit benefit is received.  

A shareholder receives a franking credit benefit if:

(a) the shareholder is a company and:

(i) a franking credit of the company arises under section 160APP or 160APPA ; or

(ii) the company is entitled to a rebate under section 46 or 46A in respect of a franked dividend or a part of a franked dividend and would not be so entitled if the dividend were an unfranked dividend; or

(b) the shareholder is a trustee or a partnership and an amount is included in the shareholder's assessable income because of the operation of section 160AQT; or

(c) the shareholder is entitled to a rebate of tax under section 160AQU , 160AQY or 160ASEP ; or

(d) the shareholder is not liable to pay tax under section 128B on a dividend or a part of a dividend because of the operation of paragraph 128B(3)(ga); or

(e) the shareholder is a company and an exempting credit of the company arises under section 160AQCNF .

160AQCBA(17)   Meaning of greater benefit from franking credits .  

The circumstances in which a shareholder would, in a year of income, derive a greater benefit from franking credits than another shareholder include, but are not limited to:

(a) any of the following circumstances existing in relation to the other shareholder and not in relation to the first shareholder:

(i) the shareholder is a non-resident;

(ii) the amount of tax (if any) that, apart from this Part, would be payable by the shareholder is less than the amount of the rebate of tax to which the shareholder would be entitled under section 160AQU , 160AQY or 160ASEP ;

(iii) the shareholder is a company that is unable to pay a dividend to its shareholders in the year of income because it has not made any profits or has not made sufficient profits to do so;

(iv) the shareholder is an exempting company or a company for which no franking credits arise; and

(b) any of the following circumstances existing in relation to the first shareholder and not in relation to the other shareholder:

(i) a franking credit arises under section 160APPA ;

(ii) a franking credit or exempting credit arises under section 160AQCNF ;

(iii) subsection 160AQTA(2) or (5) applies;

(iv) section 160AQTB applies;

(c) if the relevant franking benefit is a franking rebate under section 160ASEP - the first shareholder qualifies for franking rebates under Subdivision G of Division 12A in relation to the year of income and the other shareholder does not.