Income Tax (Transitional Provisions) Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 197 - Tainted share capital accounts  

Subdivision 197-C - Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off  

SECTION 197-25   Special provisions if company chooses to untaint after introduction day  

197-25(1)    
This section applies if, after the introduction day, the company chooses under section 197-55 of new Division 197 to untaint its share capital account.

Working out the amount of section 197-60 untainting tax

197-25(2)    
For the purpose of section 197-60 of new Division 197 , the tainting amount at the time of the choice to untaint is taken to consist of:

(a) the amounts (the old Division 7B tainting amount components ) that made up the old Division 7B tainting amount; and

(b) any amounts to which new Division 197 applies that have been transferred to the company's share capital account since the introduction day and before the choice to untaint is made.

Note 1:

The company will not be liable to untainting tax if it is covered by subsection (5).

Note 2:

If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197-60 .

197-25(3)    
For the purpose of section 197-60 of new Division 197 , a reference to the section 197-45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax-paid basis franking debit amount in relation to that component (see subsection (4)).

197-25(4)    
For the purpose of subsection (3), the tax-paid-basis franking debit amount , in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:

where:

class A franking debit
means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.

class C franking debit
means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.

197-25(5)    
The company is not liable to untainting tax under section 197-60 of new Division 197 in relation to the choice to untaint if:

(a) during the period from the time when the company's share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197-60(1) of new Division 197 ); and

(b) the tainting amount for the purpose of section 197-60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section.

197-25(6)    
If:

(a) the tainting amount for the purpose of section 197-60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and

(b) during the period from the time when the company's share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company's share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197-60(1) of new Division 197 );

then, despite subsection (2) of this section, for the purpose of section 197-60 of new Division 197 , the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components.

Working out the amount of section 197-65 franking debit

197-25(7)    
For the purpose of section 197-65 of new Division 197 , the tainting amount at the time of the choice to untaint is taken to consist of:

(a) the amounts (the old Division 7B tainting amount components ) that made up the old Division 7B tainting amount; and

(b) any amounts to which new Division 197 applies that have been transferred to the company's share capital account since the introduction day and before the choice to untaint is made.

Note:

In relation to amounts described in paragraph (b), section 197-65 applies without any notional modifications.

197-25(8)    
Paragraph 197-65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph ) were substituted for it:

(b) the tax-paid basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197-65(3) in relation to the component.

197-25(9)    
Subsection 197-65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197-45 in relation to the transferred amount were instead a reference to the tax-paid basis franking debit amount in relation to the old Division 7B tainting amount component.

197-25(10)    
For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax-paid-basis franking debit amount , in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:

where:

class A franking debit
means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.

class C franking debit
means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.