New Business Tax System (Debt and Equity) Act 2001 (163 of 2001)

Schedule 1   Debt and equity interests

Part 2   Amendment of the Income Tax Assessment Act 1936

Income Tax Assessment Act 1936

101   After subsection 160AQCBA(3)

Insert:

(3A) 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.

(3B) 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.

(3C) 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.