Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 205 - Franking accounts, franking deficit tax liabilities and the related tax offset  

Operative provisions  

SECTION 205-20   Paying a PAYG instalment, income tax or diverted profits tax  

205-20(1)    
An entity pays a PAYG instalment if and only if:

(a) the entity has a liability to pay the instalment; and

(b) either:

(i) the entity makes a payment to satisfy the liability (in whole or in part); or

(ii) a credit, or an *RBA surplus, is applied to discharge or reduce the liability.

Note:

The requirement in paragraph (a) means that the entity cannot generate franking credits by making a " voluntary " payment of income tax (that is, paying an amount on account of income tax for which the entity is not liable at the time when the payment is made).

205-20(2)    
If an entity:

(a) is liable to pay a *PAYG instalment; and

(b) has a *PAYG instalment variation credit;

the PAYG instalment variation credit must be fully applied to reduce the liability for the PAYG instalment before any other credit or payment can be applied to reduce that liability.

205-20(3)    
An entity pays income tax if and only if:

(a) the entity has a liability to pay the income tax; and

(b) either:

(i) the entity makes a payment to satisfy the liability (in whole or in part); or

(ii) a credit, or an *RBA surplus, is applied to discharge or reduce the liability.

Note:

The requirement in paragraph (a) means that the entity cannot generate franking credits by making a " voluntary " payment of income tax (that is, paying an amount on account of income tax for which the entity is not liable at the time when the payment is made).

205-20(3A)    

An entity pays diverted profits tax if and only if:

(a) the entity has a liability to pay the *diverted profits tax; and

(b) either:

(i) the entity makes a payment to satisfy the liability (in whole or in part); or

(ii) a credit, or an *RBA surplus, is applied to discharge or reduce the liability.

205-20(4)    

Subparagraphs (1)(b)(ii), (3)(b)(ii) and (3A)(b)(ii) do not apply to the application of a credit allowable under or by virtue of section 45-30 or 45-215 in Schedule 1 to the Taxation Administration Act 1953 (these sections deal with credits for *PAYG instalments payable and credit on using a varied rate in certain cases).

205-20(5)    
The amount of the *PAYG instalment or income tax paid is equal to:

(a) the amount of the liability, if it is satisfied in full; or

(b) the amount by which the liability is reduced, if it is not satisfied in full.

205-20(6)    
If:

(a) a surplus in an *RBA of an entity is applied to satisfy a liability of the entity to *pay a PAYG instalment in respect of an income year; and

(b) a credit allowable under section 45-30 in Schedule 1 to the Taxation Administration Act 1953 in respect of that income year is included in the RBA; and

(c) the RBA does not include the liability to pay the *PAYG instalment; and

(d) the amount of the credit exceeds the income tax assessed to the entity in respect of that income year;

the amount of the PAYG instalment paid by virtue of the application of the surplus is reduced by the amount of the excess mentioned in paragraph (d).