Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-6 - THE IMPUTATION SYSTEM

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Division 202 - Franking a distribution

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Subdivision 202-C - Which distributions can be franked?

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Operative provisions

SECTION 202-45

202-45 Unfrankable distributions

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The following are unfrankable :

(a) (Repealed by No 101 of 2003)

(b) (Repealed by No 53 of 2015)

(c) where the purchase price on the buy-back of a *share by a *company from one of its *members is taken to be a dividend under section 159GZZZP of the Income Tax Assessment Act 1936 - so much of that purchase price as exceeds what would be the market value (as normally understood) of the share at the time of the buy-back if the buy-back did not take place and were never proposed to take place;

(d) a *distribution in respect of a *non-equity share;

(e)

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a distribution that is sourced, directly or indirectly, from a company ' s *share capital account;

(ea) a distribution or a part of a distribution to which subsection 207-159(1) of this Act applies (distributions funded by capital raising);

(f)

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an amount that is taken to be an unfrankable distribution under section 215-10 or 215-15 of this Act;

(g)

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an amount that is taken to be a dividend for any purpose under any of the following provisions:

(i) unless subsection 109RB(6) or 109RC(2) of the Income Tax Assessment Act 1936 applies in relation to the amount - Division 7A of Part III of that Act (distributions to entities connected with a *private company);

(ii) (Repealed by No 79 of 2007 )

(iii) section 109 of that Act (excessive payments to shareholders, directors and associates);

(iv) section 47A of that Act (distribution benefits - CFCs);

(h) an amount that is taken to be an unfranked dividend for any purpose:

(i) under section 45 of the Income Tax Assessment Act 1936 (streaming bonus shares and unfranked dividends);

(ii) because of a determination of the Commissioner under section 45C of that Act (streaming dividends and capital benefits);

(i) a *demerger dividend;

(j)

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a distribution that section 152-125 or 220-105 of this Act says is unfrankable;

(k) a distribution by a *listed public company that is consideration for the cancellation of a *membership interest in the company as part of a selective reduction of capital, including a selective reduction within the meaning of section 256B of the Corporations Act 2001 .

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History

S 202-45 amended by No 101 of 2023, s 3 and Sch 4 item 19, by inserting para (k), effective 1 January 2024. No 101 of 2023, s 3 and Sch 4 item 21 contain the following application provisions:

21 Application of amendments
(1)
The amendments made by this Part apply to a cancellation of a membership interest by a listed public company if:
(a) both:

(i) the cancellation is announced to the market at or before the time the cancellation occurs; and

(ii) the cancellation is first announced to the market on or after 18 November 2022; or

(b) both:

(i) the cancellation is not announced to the market, or the cancellation is first announced to the market after the cancellation occurs; and

(ii) the cancellation occurs on or after 18 November 2022.

(2)
The cancellation is announced to the market if:
(a) the rules of an approved stock exchange require the company to notify the stock exchange of the cancellation for the purpose of release to the market; and
(b) notification of the cancellation is released to the market following such disclosure.

S 202-45 amended by No 101 of 2023, s 3 and Sch 4 items 13 - 18, by substituting " the Income Tax Assessment Act 1936 " for " that Act " in para (c), " *distribution " for " distribution " in para (d), inserting " of this Act " in para (f), " of the Income Tax Assessment Act 1936 " in para (g)(i), substituting " the Income Tax Assessment Act 1936 " for " that Act " in para (h)(i) and inserting " of this Act " in para (j), effective 1 January 2024.

S 202-45 amended by No 101 of 2023, s 3 and Sch 5 item 1, by inserting para (ea), effective 28 November 2023.

S 202-45 amended by No 53 of 2015, s 3 and Sch 1 item 15, by repealing para (b), applicable in relation to the 2016-17 income year and later income years. Para (b) formerly read:

(b) a distribution to which paragraph 24J(2)(a) of the Income Tax Assessment Act 1936 applies that is taken under section 24J of the Income Tax Assessment Act 1936 to be *derived from sources in a prescribed Territory, as defined in subsection 24B(1) of the Income Tax Assessment Act 1936 (distributions by certain *corporate tax entities from sources in Norfolk Island);

S 202-45 amended by No 79 of 2007 , s 3 and Sch 6 item 4, by substituting para (e), applicable in relation to distributions made on or after 1 July 2004. Para (e) formerly read:

(e) a distribution that is taken under subsection 46M(3) or paragraph 46M(4)(a) of that Act not to be a *frankable dividend (dividends paid from certain accounts such as *share capital accounts);

S 202-45 amended by No 79 of 2007 , s 3 and Sch 1 item 41, by repealing para (g)(ii), applicable to assessments for the income year in which 1 July 2006 occurred and later income years. Para (g)(ii) formerly read:

(ii) section 108 of that Act (loans to shareholders and associates);

S 202-45 amended by No 79 of 2007 , s 3 and Sch 1 item 28, by inserting " unless subsection 109RB(6) or 109RC(2) applies in relation to the amount - " before " Division " in para (g)(i), applicable to assessments for the income year in which 1 July 2006 occurred and later income years.

S 202-45 amended by No 55 of 2007 , s 3 and Sch 1 item 58, by inserting " 152-125 or " before " 220-105 " in para (j), applicable to CGT events happening in the 2006-07 income year or later income years.

S 202-45 amended by No 101 of 2006 , s 3 and Sch 2 item 709, by amending the reference to a repealed inoperative provision in para (b), effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .

S 202-45 amended by No 101 of 2003, No 67 of 2003, No 117 of 2002, No 90 of 2002 and inserted by No 48 of 2002.

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