Taxation Laws Amendment Act (No. 2) 1999 (93 of 1999)
Schedule 4 Franking credits, franking debits and the intercorporate dividend rebate
Income Tax Assessment Act 1936
22 After Subdivision B of Division 7 of Part IIIAA
Insert:
Subdivision BA - Maximum franking credits, maximum franking rebates, and maximum potential rebate amounts (and allowable deductions), for taxpayers who elect under section 160APHR
160AQZD Application of Subdivision
This Subdivision applies in relation to a year of income to a taxpayer (the electing taxpayer ) who makes an election under section 160APHR in relation to the year of income.
160AQZE Maximum franking credits
(1) If:
(a) any dividends are paid on shares during the year of income; and
(b) the electing taxpayer is a company that held the shares or had interests in the shares; and
(c) the shares or interests are managed by or on behalf of the electing taxpayer as or in a discrete fund; and
(d) the election under section 160APHR related to the shares or interests; and
(e) the sum of the franking credits to which the electing taxpayer is entitled under this Part in respect of all those dividends exceeds the ceiling amount in relation to the fund in relation to the year of income;
there arises, at the end of the year of income, a franking debit of the company equal to the excess.
(2) If the electing taxpayer is entitled to both class A franking credits and class C franking credits under this Part in respect of any of the dividends referred to in subsection (1), the sum of the franking credits to which the taxpayer is entitled under this Part in respect of all the dividends referred to in that subsection is the sum of:
(a) the class C franking credits in respect of any of those dividends; and
(b) the amount worked out by using the formula:
The class A franking credits in respect of any of those dividends * (39 / 61) * (64 / 36)
(3) The ceiling amount , in relation to the fund in relation to the year of income, is the notional total credit amount in relation to the fund in relation to the year of income increased by:
(a) if paragraph (b) does not apply - 20%; or
(b) if a different percentage is prescribed by the regulations in relation to the index by reference to which the relevant benchmark portfolio of shares that applies in respect of the fund is determined - that percentage.
(4) The notional total credit amount , in relation to the fund in relation to the year of income, is:
(a) subject to paragraph (b), an amount equal to the sum of the franking credits to which a taxpayer (the notional taxpayer ) of the same class or kind as the electing taxpayer would be entitled under this Part in respect of dividends on shares in the benchmark portfolio of shares that applies in respect of the fund (being shares that become ex dividend during the year of income) if:
(i) those dividends were paid to the notional taxpayer in the year of income; and
(ii) the notional taxpayer were a qualified person under section 160APHO in relation to those dividends; or
(b) if the regulations provide another method of calculating notional total credit amounts in relation to funds managed in the year of income by or on behalf of a class of taxpayers in which the electing taxpayer is included - the amount calculated in relation to the fund in accordance with that method.
(5) If the first acquisition of shares or interests in shares that are managed by or on behalf of the electing taxpayer as or in a particular discrete fund occurred during the year of income, the notional total credit amount in relation to the fund in relation to the year of income is to be worked out as if the year of income did not include the part of the year of income before the acquisition occurred.
(6) If all the shares and interests in shares that were managed by or on behalf of the electing taxpayer as or in a particular discrete fund are disposed of during the year of income, the notional total credit amount in relation to the fund in relation to the year of income is to be worked out as if the year of income did not include the part of the year of income after the last disposal of any of the shares or interests occurred.
(7) The regulations may determine what constitutes a kind of taxpayer or class of taxpayers for the purposes of this section.
160AQZF Maximum franking rebates or intercorporate dividend rebates
(1) If:
(a) any dividends are paid on shares during the year of income; and
(b) the electing taxpayer held the shares or had interests in the shares; and
(c) the shares or interests are managed by or on behalf of the electing taxpayer as or in a discrete fund; and
(d) the election under section 160APHR related to the shares or interests;
the sum of the rebates of tax to which the electing taxpayer is entitled under this Part or Subdivision D of Division 2 of Part III in respect of all those dividends is not to exceed the ceiling amount in relation to the fund in relation to the year of income.
(2) The ceiling amount , in relation to the fund in relation to the year of income, is the notional total rebate amount in relation to the fund in relation to the year of income increased by:
(a) if paragraph (b) does not apply - 20%; or
(b) if a different percentage is prescribed by the regulations in relation to the index by reference to which the relevant benchmark portfolio of shares that applies in respect of the fund is determined - that percentage.
(3) The notional total rebate amount , in relation to the fund in relation to the year of income, is:
(a) subject to paragraph (b), an amount equal to the sum of the rebates of tax to which a taxpayer (the notional taxpayer ) of the same class or kind as the electing taxpayer would be entitled under this Part in respect of dividends on shares in the benchmark portfolio of shares that applies in respect of the fund (being shares that become ex dividend during the year of income) if:
(i) those dividends were paid to the notional taxpayer in the year of income; and
(ii) the notional taxpayer were a qualified person under section 160APHO in relation to those dividends; or
(b) if the regulations provide another method of calculating notional total rebate amounts in relation to funds managed in the year of income by or on behalf of a class of taxpayers in which the electing taxpayer is included - the amount calculated in relation to the fund in accordance with that method.
(4) If the first acquisition of shares or interests in shares that are managed by or on behalf of the electing taxpayer as or in a particular discrete fund occurred during the year of income, the notional total rebate amount in relation to the fund in relation to the year of income is to be worked out as if the year of income did not include the part of the year of income before the acquisition occurred.
(5) If all the shares and interests in shares that were managed by or on behalf of the electing taxpayer as or in a particular discrete fund are disposed of during the year of income, the notional total rebate amount in relation to the fund in relation to the year of income is to be worked out as if the year of income did not include the part of the year of income after the last disposal of any of the shares or interests occurred.
(6) The regulations may determine what constitutes a kind of taxpayer or class of taxpayers for the purposes of this section.
160AQZG Maximum potential rebate amount and allowable deduction
(1) If:
(a) any dividends are paid on shares during the year of income; and
(b) the electing taxpayer is a taxpayer mentioned in paragraph 160APHR(1)(a), (b), (j) or (k) who held the shares or had interests in the shares; and
(c) the shares or interests are managed by or on behalf of the electing taxpayer as or in a discrete fund; and
(d) the election under section 160APHR related to the shares or interests;
the sum of the amounts represented by the letters PR and EPR in the formulas in the definition of potential rebate amount in section 160APA in relation to the electing taxpayer in respect of all those dividends is not to exceed the ceiling amount in relation to the fund in relation to the year of income.
(2) The ceiling amount , in relation to the fund in relation to the year of income, is the notional total rebate amount in relation to the fund in relation to the year of income increased by:
(a) if paragraph (b) does not apply - 20%; or
(b) if a different percentage is prescribed by the regulations in relation to the index by reference to which the relevant benchmark portfolio of shares that applies in respect of the fund is determined - that percentage.
(3) The notional total rebate amount , in relation to the fund in relation to the year of income, is:
(a) subject to paragraph (b), an amount equal to the sum of the rebates of tax to which a taxpayer (the notional taxpayer ) who is a natural person and a resident of Australia would be entitled under this Part in respect of dividends on shares in the benchmark portfolio of shares that applies in respect of the fund (being shares that become ex dividend during the year of income) if:
(i) those dividends were paid to the notional taxpayer in the year of income; and
(ii) the notional taxpayer were a qualified person under section 160APHO in relation to those dividends; or
(b) if the regulations provide another method of calculating notional total rebate amounts in relation to funds managed in the year of income by or on behalf of a class of taxpayers in which the electing taxpayer is included - the amount calculated in relation to the fund in accordance with that method.
(4) If the first acquisition of shares or interests in shares that are managed by or on behalf of the electing taxpayer as or in a particular discrete fund occurred during the year of income, the notional total rebate amount in relation to the fund in relation to the year of income is to be worked out as if the year of income did not include the part of the year of income before the acquisition occurred.
(5) If all the shares and interests in shares that were managed by or on behalf of the electing taxpayer as or in a particular discrete fund are disposed of during the year of income, the notional total rebate amount in relation to the fund in relation to the year of income is to be worked out as if the year of income did not include the part of the year of income after the last disposal of any of the shares or interests occurred.
(6) If the sum of the amounts referred to in subsection (1) in relation to the electing taxpayer in respect of dividends paid during the year of income exceeds the ceiling amount referred to in that subsection in relation to the year of income, the excess is allowable as a deduction from the electing taxpayer's assessable income of the year of income.
160AQZH Benchmark portfolio of shares
(1) The benchmark portfolio of shares that is applicable in respect of a fund managed by or on behalf of a taxpayer is the portfolio of the shares and other securities used to calculate:
(a) the All Ordinaries Index published by the Australian Stock Exchange Limited; or
(b) if the regulations prescribe another index in relation to a class of taxpayers in which the taxpayer is included - the other index;
being a portfolio whose value is equal to the net equity exposure of the fund for the year of income.
(2) The net equity exposure of a fund for the year of income is the average of the values calculated for each relevant week during the year of income of the long and short positions that the fund has in such of the shares, or in interests in such of the shares, included in the fund as:
(a) are shares:
(i) in companies that are residents of Australia; and
(ii) that are included in the relevant index; or
(b) if the relevant index is the index referred to in paragraph (1)(a) - are ordinary shares:
(i) in companies that are residents of Australia; and
(ii) that are listed for quotation in the official list of Australian Stock Exchange Limited.
(3) The value of a position in a share, or a position in an interest in a share, is calculated by multiplying the value of the share or interest by the delta of the position in the share or interest.
(4) The values calculated for each relevant week as mentioned in subsection (2) are to be calculated on the same day each week (being the day chosen for the first calculation) or, if another basis for calculating those values is prescribed by the regulations, are to be calculated on that other basis.
(5) A relevant week referred to in subsection (2) is each week during the year of income other than:
(a) if the first acquisition of shares or interests in shares that are managed by or on behalf of the electing taxpayer as or in a particular discrete fund occurred during the year of income - a week occurring before the week in which the acquisition occurred; and
(b) if all the shares or interests in shares that are managed by or on behalf of the electing taxpayer as or in a particular discrete fund were disposed of during the year of income - a week occurring after the week in which the last disposal of shares or interests occurred.
Subdivision BB - Maximum franking rebates and allowable deductions for taxpayers who elect under section 160APHT
160AQZI Application of Subdivision
This Subdivision applies in relation to a year of income to a taxpayer who makes an election under section 160APHT in relation to the year of income.
160AQZJ Maximum franking rebates
(1) The sum of the rebates of tax to which the taxpayer is entitled under sections 160AQU, 160AQX and 160AQZ in respect of dividends paid or distributions made during the year of income is not to exceed the amount (the applicable amount ) worked out in accordance with subsection (2).
(2) The applicable amount is worked out as follows:
(a) calculate the total of the amounts of the rebates of tax to which the taxpayer would be entitled under sections 160AQU, 160AQX and 160AQZ in respect of the year of income if he or she had not made the election referred to in section 160AQZI but were a qualified person in relation to each of those dividends because of section 160APHO;
(b) deduct from $2000 an amount of $4 for each $1 by which the total amount calculated under paragraph (a) exceeds $2000;
(c) the amount (if any) remaining is the applicable amount.
160AQZK Deduction allowable
(1) An amount calculated in accordance with subsection (2) is allowable as a deduction from the taxpayer's assessable income of the year of income.
(2) The amount allowable as a deduction is the lesser of $2,500 or the amount worked out using the formula:
Total rebates - $2,000 + Deducted amount
where:
deducted amount is the amount deducted under paragraph 160AQZJ(2)(b).
total rebates means the total of the amounts of the rebates of tax calculated under paragraph 160AQZJ(2)(a).