Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX

View history reference

View history note

PART 4-5 - GENERAL

View history reference

View history note

Division 802 - Foreign residents ' income with an underlying foreign source

View history reference

View history note

Subdivision 802-A - Conduit foreign income

View history reference

View history note

History

Subdiv 802-A inserted by No 147 of 2005, s 3 and Sch 2 item 1, applicable to income years starting on or after 1 July 2005. No 147 of 2005, s 3 and Sch 2 items 27 and 28, contains the following additional application provisions:

27 Income years starting on 1 July 2005 or after that day and before Royal Assent
(1)
This item applies to an entity for whom an income year (the first year ) starts:

(a) on 1 July 2005; or

(b) after that day and before the day on which this Act receives the Royal Assent [ ie 14 December 2005].

(2)
The entity can only declare an amount to be conduit foreign income under Subdivision 802-A of the Income Tax Assessment Act 1997 on or after the day on which this Act receives the Royal Assent.

(3)
An FDA surplus that exists for the entity under Subdivision B of Division 11A of Part III of the Income Tax Assessment Act 1936 at the end of the day before the day on which this Act receives the Royal Assent has effect as if it were the entity's conduit foreign income under Subdivision 802-A of the Income Tax Assessment Act 1997 .

(4)
Any FDA credit under section 128TA of the Income Tax Assessment Act 1936 that arises during the period starting on 1 July 2005 and ending on the day before the day on which this Act receives the Royal Assent cannot also be conduit foreign income.

(5)
Section 802-40 of the Income Tax Asssessment Act 1997 , as inserted by item 1, does not apply to the first year.
28 Later starting income years
(1)
This item applies to an entity for whom an income year (also the first year ) starts on or after the day on which this Act receives the Royal Assent and before 1 July 2006.

(2)
The amendments made by items 7, 8, 9, 13 and 16, and 19 to 24 apply from the start of the first year.

(3)
An FDA surplus that exists for the entity under Subdivision B of Division 11A of Part III of the Income Tax Assessment Act 1936 at the start of the first year has effect as if it were the entity's conduit foreign income under Subdivision 802-A of the Income Tax Assessment Act 1997 .
...

Operative provisions

SECTION 802-60 No streaming of distributions

View history reference

802-60(1)
Subsection (2) has effect if:

(a) an *Australian corporate tax entity makes one or more *frankable distributions in a *franking period; and

(b) at least one of the *distributions has an *unfranked part; and

(c) the entity declares an amount of the unfranked part to be *conduit foreign income.

802-60(2)
If the entity does not, for that *franking period, declare the same proportion of *conduit foreign income for all *membership interests and *non-share equity interests then, instead of the amount that it declared to be conduit foreign income on those *distributions, it is taken to have declared under section 802-45 the greater amount that it would have declared had it declared that same proportion on all those distributions.

Note:

Breaching subsection (2) may make the entity subject to a penalty under section 288-80 in Schedule 1 to the Taxation Administration Act 1953 (about over declaring conduit foreign income).

Example:

There are 10,000 membership interests in AusCo Limited, 7,500 held by foreign residents and 2,500 held by Australian residents. It has $1,800 of conduit foreign income.

AusCo makes an unfranked distribution of 50 cents per membership interest to all of its members. It declares $1,500 of the distribution to be conduit foreign income for its 7,500 foreign membership interests (20 cents per membership interest or 40% of each distribution) and none for its Australian membership interests.

AusCo is taken to have declared the same proportion (40% of each distribution) of conduit foreign income for its Australian membership interests (which amounts to $500 of conduit foreign income). It is therefore taken to have declared $2,000 of conduit foreign income. This is an over-declaration of $200 and a penalty under section 288-80 in Schedule 1 to the Taxation Administration Act 1953 will apply.

802-60(3)
For the purposes of subsection (2), ignore *membership interests and *non-share equity interests that do not carry a right to receive *distributions (other than distributions on winding up).

802-60(4)
Despite subsection (2), an entity that receives a *frankable distribution that has an *unfranked part is entitled to rely on the *distribution statement made by the entity that made the distribution.

View history note

Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.