Tax Laws Amendment (2004 Measures No. 2) Act 2004 (83 of 2004)

Schedule 2   Consolidation etc.

Part 9   International tax

Division 2   Foreign dividend accounts

Income Tax Assessment Act 1997

50   After section 719-900

Insert:

719-903 Special rules for certain FDA credits and FDA debits

(1) The objects of this section are:

(a) to let *FDA credits arise for the *provisional head company of a *MEC group under paragraph 128TA(1)(b) of the Income Tax Assessment Act 1936; and

(b) to ensure that an *FDA debit of the appropriate amount arises under section 128TB of that Act for an Australian-taxable dividend amount.

Note: Paragraph 128TA(1)(b) of the Income Tax Assessment Act 1936 gives a resident company an FDA credit when a non-portfolio dividend is paid to the company, if the company is taken, for the purposes of Division 18 (about foreign tax credits) of Part III of that Act, to have paid and been personally liable for foreign tax on the dividend.

(2) This section operates if (ignoring section 717-515) a non-portfolio dividend (as defined in section 317 of the Income Tax Assessment Act 1936) is paid to a company (the dividend recipient ) at a time (the payment time ) when the dividend recipient is a *member of a *MEC group in an income year (the payment year ).

(3) If the conditions in subsection (4) are met, paragraph 128TA(1)(b) of the Income Tax Assessment Act 1936 operates as if the *provisional head company of the group at the payment time were, for the purposes of Division 18 of Part III of that Act, taken to have paid and been personally liable for foreign tax in respect of the dividend.

(4) The conditions are:

(a) an amount of the dividend is included in the assessable income of the *head company of the group for the payment year; and

(b) the dividend recipient paid and was personally liable for that foreign tax (whether or not the dividend recipient was a *member of the group when paying that foreign tax).

(5) If the *provisional head company of the group at the payment time is not the *head company of the group for the payment year, section 128TB of the Income Tax Assessment Act 1936 operates in relation to the existence and amount of the Australian-taxable dividend amount as if the dividend had been paid to the head company.

Note: For the purposes of working out the existence and amount of the Australian-taxable dividend amount, the head company is taken to have paid and been personally liable for foreign tax in respect of the dividend. See section 717-10 (applying because of section 719-2).

(6) Subdivision 717-J (about *foreign dividend accounts), as it applies in relation to the *members of the group in accordance with sections 719-2 and 719-900, operates subject to this section.