Taxation Laws Amendment Act (No. 2) 1999 (93 of 1999)

Schedule 5   Franking of dividends by exempting companies and former exempting companies

Income Tax Assessment Act 1936

63   At the end of Subdivision B of Division 7 of Part IIIAA

Add:

160AQZB Where franked dividend paid by exempting company to trust or partnership

Person holding an interest in a trust or partnership to be treated as having received share of dividend directly from exempting company

(1) If:

(a) a class A franked dividend or a class C franked dividend (the relevant dividend ) is paid by an exempting company to a shareholder that is a trustee of a trust or is a partnership; and

(b) at the time when the relevant dividend was paid, a person who held an interest in the trust or partnership was a life assurance company, an exempting company, or a person who acquired the interest under an eligible employee share scheme, being a company or person in respect of whom or in respect of which a franking credit or franking rebate would have arisen if the relevant dividend had been paid to the company or person; and

(c) an amount attributable to the relevant dividend is included in the assessable income of the holder of the interest, or would have been so included if:

(i) sections 110C, 112A and 116FB had not been enacted; and

(ii) the definition of eligible insurance policy in section 116E were amended by omitting "an RA policy, a superannuation policy, a sickness policy, a funeral policy or an eligible policy" and substituting "an RA policy or a superannuation policy";

then, for the purposes of the application of this Part in relation to the holder of the interest:

(d) the part of the relevant dividend to which the amount referred to in paragraph (1)(c) is attributable is taken:

(i) to have been a class A franked dividend or a class C franked dividend, as the case may be, paid to the holder of the interest; and

(ii) to have been franked to the same extent as the relevant dividend; and

(e) the holder of the interest is taken to have been the holder of the share in respect of which the relevant dividend was paid.

Holding an interest in a trust

(2) A person is taken to hold an interest in a trust if:

(a) the person is a beneficiary under the trust; or

(b) the person derives, or will derive, income indirectly, through interposed trusts or partnerships, from dividends received by the trustee.

Holding an interest in a partnership

(3) A person is taken to hold an interest in a partnership if:

(a) the person is a partner in the partnership; or

(b) the person derives, or will derive, income indirectly, through interposed trusts or partnerships, from dividends received by the partnership.

Calculation of part of dividend to which amount received by holder of interest is attributable

(4) For the purposes of subsection (1), the Part of the relevant dividend to which the amount referred to in paragraph (1)(c) is attributable is taken to be the amount worked out using the formula:

Amount of dividend * (Share of income / Total income)

where:

amount of dividend means the amount of the relevant dividend paid to the trustee or partnership.

share of income means the share of the income of the trust, or of the income of the partnership, of the year of income to which the holder of the interest is entitled.

total income means the income of the trust or partnership of the year of income.

160AQZC Where exempted dividend paid by former exempting company to trust or partnership

Person holding an interest in a trust or partnership to be treated as having received share of dividend directly from former exempting company

(1) If:

(a) a class A exempted dividend or a class C exempted dividend (the relevant dividend ) is paid by a former exempting company to a shareholder that is a trustee of a trust or is a partnership; and

(b) at the time when the relevant dividend was paid, a person who held an interest in the trust or partnership was a life assurance company, an exempting company, a former exempting company, or a person who acquired the interest under an eligible employee share scheme, being a company or person in respect of which or in respect of whom a franking credit, franking rebate or exempting credit would have arisen if the relevant dividend had been paid to the company or person; and

(c) an amount attributable to the relevant dividend is included in the assessable income of the holder of the interest, or would have been so included if:

(i) sections 110C, 112A and 116FB had not been enacted; and

(ii) the definition of eligible insurance policy in section 116E were amended by omitting "an RA policy, a superannuation policy, a sickness policy, a funeral policy or an eligible policy" and substituting "an RA policy or a superannuation policy";

then, for the purposes of the application of this Part in relation to the holder of the interest:

(d) the part of the relevant dividend to which the amount referred to in paragraph (1)(c) is attributable is taken:

(i) to have been a class A exempted dividend or a class C exempted dividend, as the case may be, paid to the holder of the interest; and

(ii) to have been exempted to the same extent as the relevant dividend; and

(e) the holder of the interest is taken to have been the holder of the share in respect of which the relevant dividend was paid.

Holding an interest in a trust

(2) A person is taken to hold an interest in a trust if:

(a) the person is a beneficiary under the trust; or

(b) the person derives, or will derive, income indirectly, through interposed trusts or partnerships, from dividends received by the trustee.

Holding an interest in a partnership

(3) A person is taken to hold an interest in a partnership if:

(a) the person is a partner in the partnership; or

(b) the person derives, or will derive, income indirectly, through interposed trusts or partnerships, from dividends received by the partnership.

Calculation of part of dividend to which amount received by holder of interest is attributable

(4) For the purposes of subsection (1), the Part of the relevant dividend to which the amount referred to in paragraph (1)(c) is attributable is taken to be the amount worked out using the formula:

Amount of dividend * (Share of income / Total income)

where:

amount of dividend means the amount of the relevant dividend paid to the trustee or partnership.

share of income means the share of the income of the trust, or of the income of the partnership, of the year of income to which the holder of the interest is entitled.

total income means the income of the trust or partnership of the year of income.