Income Tax Assessment Act 1936

PART IVA - SCHEMES TO REDUCE INCOME TAX  

SECTION 177EB   CANCELLATION OF FRANKING CREDITS - CONSOLIDATED GROUPS  

177EB(1)   Expressions to have same meanings as in section 177EA and Income Tax Assessment Act 1997.  

Unless the contrary intention appears, expressions used in this section:

(a) if those expressions are defined in section 177EA - have the same meanings as in that section (subject to subsection (10) of this section); and

(b) otherwise - have the same meanings as in the Income Tax Assessment Act 1997 .

177EB(2)   This section and section 177EA do not limit each other.  

This section does not limit the operation of section 177EA , and section 177EA does not limit the operation of this section.

177EB(3)   Application of section.  

This section applies if:

(a) there is a scheme for a disposition of membership interests in an entity (the joining entity ); and

(b) as a result of the disposition, the joining entity becomes a subsidiary member of a consolidated group; and

(c) a credit arises in the franking account of the head company of the group because of the joining entity becoming a subsidiary member of the group; and

(d) having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling the credit referred to in paragraph (c) to arise in the head company ' s franking account.

177EB(4)   Bare acquisition of membership interests.  

It is not to be concluded for the purposes of paragraph (3)(d) that a person entered into or carried out a scheme for a purpose mentioned in that paragraph merely because the person acquired membership interests in the joining entity.

177EB(5)   Commissioner to determine no franking credit.  

The Commissioner may make, in writing, a determination that no credit is to arise in the head company ' s franking account because of the joining entity becoming a subsidiary member of the consolidated group. A determination does not form part of an assessment.

177EB(6)   Effect of determination.  

A determination under subsection (5) has effect according to its terms.

177EB(7)   Notice of determination.  

If the Commissioner makes a determination under subsection (5), the Commissioner must serve notice in writing of the determination on the head company.

177EB(8)    
(Repealed by No 2 of 2015)

177EB(9)   Objections.  

If a taxpayer to whom a determination relates is dissatisfied with the determination, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953 .

177EB(10)   Relevant circumstances.  

The relevant circumstances of a scheme include the following:

(a) the extent and duration of the risks of loss, and the opportunities for profit or gain, from holding membership interests in the joining entity that are respectively borne by or accrue to the parties to the scheme, and whether there has been any change in those risks and opportunities for the head company or any other party to the scheme (for example, a change resulting from the making of any contract, the granting of any option or the entering into of any arrangement with respect to any membership interests in the joining entity);

(b) whether the head company, or a person holding membership interests in the head company, would, in the year of income in which the joining entity became a subsidiary member of the group or any later year of income, derive a greater benefit from franking credits than other persons who held membership interests in the joining entity immediately before it became a subsidiary member of the group;

(c) the extent (if any) to which the joining entity was able to pay a franked dividend or distribution immediately before it became a subsidiary member of the group;

(d) whether any consideration paid or given by or on behalf of, or received by or on behalf of, the head company in connection with the scheme (for example, the amount of any interest on a loan) was calculated by reference to the franking credit benefits to be received by the head company;

(e) the period for which the head company held membership interests in the joining entity;

(f) any of the matters referred to in subsection 177D(2).

177EB(11)   Section to apply to exempting credits.  

This section applies to exempting credits arising in the exempting account of the head company of a consolidated group in the same way that it applies to credits arising in the head company ' s franking account.