New Business Tax System (Imputation) Act 2002 (48 of 2002)

Schedule 4   Transitional provisions dealing with the conversion of the franking account

Income Tax (Transitional Provisions) Act 1997

2   After Division 201

Insert:

Division 205 - Franking accounts

205-1 Order of events provision

If a company has a franking account under Part IIIAA of the Income Tax Assessment Act 1936 (the old account ) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the companys franking account under section 205-10 (the new account ) as follows:

(a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205-5; and

(b) if there is a franking surplus in the account at the end of 30 June 2002, it gives rise to a franking credit in the new account under section 205-10.

205-5 Washing estimated debits out of the franking account before conversion

If, under Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002.

Note: A franking credit of the appropriate class equal to the debit will arise under section 160APU of that Act at the beginning of 30 June 2002.

205-10 Converting franking surplus on 30 June 2002 into a franking credit on 1 July 2002 normal balancers

(1) This section applies to companies that have a franking year that ends at the end of 30 June 2002 under Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act ).

(2) If the company has a franking surplus under Part IIIAA of the 1936 Act at the end of 30 June 2002:

(a) no franking credit arises under section 160APL of that Act because of the surplus; and

(b) a franking credit arises on 1 July 2002 in the franking account established under section 205-10 of the Income Tax Assessment Act 1997 (the 1997 Act ) for the company.

The amount of the franking credit is worked out under subsection (3).

(3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class.

Conversion of 1936 Act franking surplus into 1997 Act franking credit