Tax Laws Amendment (2006 Measures No. 4) Act 2006 (168 of 2006)

Schedule 3   Simplified imputation system: imputation for NZ resident companies

Part 1   Main amendments

Income Tax Assessment Act 1997

1   After section 220-300

Insert:

Effect of NZ franking company making distribution that is non-assessable and non-exempt

220-350 Providing for a franking credit to arise

(1) This section has effect if:

(a) an *NZ franking company makes a *franked distribution to a company (the receiving company ); and

(b) the distribution does not *flow indirectly through the receiving company to another entity; and

(c) because of section 23AI, 23AJ or 23AK of the Income Tax Assessment Act 1936:

(i) all of the distribution is *exempt income, or is *non-assessable non-exempt income, in the hands of the receiving company; or

(ii) part of the distribution is exempt income, or is non-assessable non-exempt income, in the hands of the receiving company.

(2) A *franking credit arises in the receiving company's *franking account on the day on which the distribution is made.

Note: If only part of the distribution is exempt income or non-assessable non-exempt income:

(a) a franking credit in relation to the distribution will arise under this section in relation to the part of the distribution that is exempt income, or that is non-assessable non-exempt income; and

(b) another franking credit in relation to the distribution will arise under item 3 of the table in subsection 205-15(1) in relation to the part of the distribution that is not exempt income, or that is not non-assessable non-exempt income (see also subsection 207-90(2)).

(3) The amount of the *franking credit that so arises is:

(a) if subparagraph (1)(c)(i) applies - the amount of the franking credit on the distribution made by the *NZ franking company; or

(b) if subparagraph (1)(c)(ii) applies - so much of the franking credit on the distribution made by the NZ franking company as is attributable to the part of the distribution referred to in that subparagraph.

(4) The table in subsection 205-15(1) has effect subject to this section.