Taxation Laws Amendment Act (No. 3) 1997 (147 of 1997)

Schedule 4   Dividend imputation and tax exempt entities

Part 1   Amendment of the Income Tax Assessment Act 1936

2   At the end of Schedule 2D

Add:

Subdivision 57-M¾Imputation

57-120 Cancellation of franking surplus, credit or debit

Cancellation of surplus

(1) Subject to subsections (3) and (4), if, immediately before the transition time, the transition taxpayer or a subsidiary (see section 57-125) of the transition taxpayer has a class A franking surplus, a class B franking surplus or a class C franking surplus, then the surplus is reduced to nil at the transition time.

Cancellation of credit/debit

(2) Subject to subsections (3) and (4), if:

(a) at any time after the transition time, there arises a franking credit or a franking debit of the transition taxpayer or of a subsidiary of the transition taxpayer; and

(b) the franking credit or franking debit is to any extent attributable to a period, or to an event taking place, before the transition time;

the franking credit or franking debit is to that extent taken not to have arisen.

Cases where subsections (1) and (2) do not apply to the transition taxpayer

(3) If:

(a) one or more class A franking debits, class B franking debits or class C franking debits of the transition taxpayer arise after the transition time; and

(b) any of the debits is to an extent (the amount of which is the pre-transition time component of the debit) attributable to the period, or to an event taking place, before the transition time; and

(c) immediately before the transition time:

(i) there was a class A franking surplus, class B franking surplus or class C franking surplus of the transition taxpayer that was less than the total of the pre-transition time components of all of the debits of that class; or

(ii) there was no class A franking surplus, there was no class B franking surplus or there was no class C franking surplus of the transition taxpayer;

then:

(d) in a case covered by subparagraph (c)(i) - subsection (1) does not apply to the surplus or surpluses concerned; and

(e) in any case - subsection (2) does not apply to the debits of the class or classes concerned.

Cases where subsections (1) and (2) do not apply to a subsidiary

(4) If:

(a) one or more class A franking debits, class B franking debits or class C franking debits of a subsidiary of the transition taxpayer arise after the transition time; and

(b) any of the debits is to an extent (the amount of which is the pre-transition time component of the debit) attributable to the period, or to an event taking place, before the transition time; and

(c) immediately before the transition time:

(i) there was a class A franking surplus, class B franking surplus or class C franking surplus of the subsidiary that was less than the total of the pre-transition time components of all of the debits of that class; or

(ii) there was no class A franking surplus, there was no class B franking surplus or there was no class C franking surplus of the subsidiary;

then:

(d) in a case covered by subparagraph (c)(i) - subsection (1) does not apply to the surplus or surpluses concerned; and

(e) in any case - subsection (2) does not apply to the debits of the class or classes concerned.

Definitions

(5) In this section, the following expressions have the same meaning as in Part IIIAA:

57-125 Subsidiary

(1) A company (the subsidiary company ) is a subsidiary of another company (the holding company ) if all the shares in the subsidiary company are beneficially owned by:

(a) the holding company; or

(b) one or more subsidiaries of the holding company; or

(c) the holding company and one or more subsidiaries of the holding company.

(2) A company (other than the subsidiary company) is a subsidiary of the holding company if, and only if:

(a) it is a subsidiary of the holding company; or

(b) it is a subsidiary of a subsidiary of the holding company;

because of any other application or applications of this section.