Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005 (147 of 2005)

Schedule 2   Foreign residents' income with an underlying foreign source

Part 2   Other amendments

Taxation Administration Act 1953

25   After section 288-75 in Schedule 1

Insert:

288-80 Administrative penalty for over declaring conduit foreign income

(1) An *Australian corporate tax entity is liable to an administrative penalty if:

(a) the entity makes a *frankable distribution that has an *unfranked part; and

(b) the entity declares an amount of the unfranked part to be *conduit foreign income; and

(c) the sum of the amounts declared exceeds the amount of the entity's conduit foreign income at:

(i) if the entity declares the distribution before making the distribution - the time of the declaration; or

(ii) otherwise - the time the distribution is made.

(2) The amount of the penalty is the sum of the amounts worked out under subsections (3) and (4).

(3) The amount is:

where:

Australian membership interests means the number of *membership interests or *non-share equity interests in the entity that are not covered by the definition of foreign membership interests in subsection (4).

total membership interests means the number of *membership interests or *non-share equity interests in the entity held by entities that are entitled to receive the *distribution.

(4) The amount is:

Applicable withholding tax rate x Excess referred to in paragraph (1)(c) x (Foreign membership interests / Total membership interests)

where:

applicable withholding tax rate means 50% of the rate of tax set out in subparagraph 7(a)(ii) of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974.

foreign membership interests means the number of *membership interests or *non-share equity interests in the entity held by entities that are entitled to receive the *distribution and in relation to whom the entity is required to withhold amounts under section 12-210 disregarding the operation of section 12-300 (about limits on the amount withheld).

total membership interests means the number of *membership interests or *non-share equity interests in the entity held by entities that are entitled to receive the *distribution.