INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIAA - FRANKING OF DIVIDENDS  

Division 5 - Franking of dividends  

Subdivision C - Franking deficit tax and deficit deferral tax to offset company tax  

SECTION 160AQKAD   CONSEQUENCES OF OFFSET ENTITLEMENT - FRANKING CREDITS AND DEBITS  

160AQKAD(1)   Object of section.  

The object of this section is to ensure that, if the Commissioner determines that a life assurance company is entitled to an offset under section 160AQKAA , franking credits and debits that arise in relation to the company's company tax for the eligible year of income do not exceed those that would have arisen if the company had not received the offset under section 160AQKAC and instead satisfied its unreduced liability to pay company tax.

160AQKAD(2)   Overview of section.  

That object is achieved by reversing any previous franking credits and debits and recalculating them each time a determination is made by the Commissioner as a result of an original or amended company tax assessment. If the company pays a PAYG instalment or company tax, or receives a refund of company tax, after the original or amended company tax assessment that resulted in the determination is served on the company, a separate franking credit or debit will be generated (which may be subject to reversal as a result of a later assessment and determination).

160AQKAD(3)   No franking credits or franking debits except under this section.  

No franking credit or franking debit arises in relation to the company's company tax for the eligible year of income on or after the day on which the original company tax assessment for that year is served on the company, except under this section.

160AQKAD(4)   Reversing out franking credits and debits that arose before the original company tax assessment.  

If the determination is made under subsection 160AQKAA(1) (a determination made as a result of the original company tax assessment for the eligible year of income):

(a) a class C franking debit arises on the day on which the original company tax assessment is served on the company equal to the sum of all class C franking credits that have arisen in relation to the company's company tax for the eligible year of income before that day; and

(b) a class C franking credit arises on the day on which the original company tax assessment is served on the company equal to the sum of all class C franking debits that have arisen in relation to the company's company tax for the eligible year of income before that day.

160AQKAD(5)   Franking credit on original company tax assessment.  

On the day on which the original company tax assessment is served on the company, a class C franking credit equal to the adjusted amount of the amount worked out using the following formula arises:

where:

amount of the company's liability to pay company tax for the eligible year of income that would normally give rise to franking credits
is the amount worked out for the company for that year under section 160AQKAB .

reduced liability to pay company tax
means the amount, after the reduction under section 160AQKAC is made, of the company's liability to pay company tax for the eligible year of income (worked out in accordance with the original company tax assessment).

total payments of PAYG instalments and company tax
means the sum of all PAYG instalments and company tax for the eligible year of income paid by the company on or before the day on which the original company tax assessment is served.

Note:

If payments or refunds of company tax are made after the original company tax assessment is served on the company, franking credits and debits arise for those under subsections (8) and (10).

160AQKAD(6)   Reversing out franking credits and debits that arose before an amended company tax assessment.  

If the determination is made under subsection 160AQKAA(3) (a determination made as a result of an amended company tax assessment for the eligible year of income):

(a) a class C franking debit arises on the day on which the amended company tax assessment is served on the company equal to the sum of all class C franking credits that have arisen before that day in relation to the company's company tax for the eligible year of income, other than class C franking credits in relation to which a class C franking debit has already arisen because of a previous application of this section; and

(b) a class C franking credit arises on the day on which the amended company tax assessment is served on the company equal to the sum of all class C franking debits that have arisen before that day in relation to the company's company tax for the eligible year of income, other than class C franking debits in relation to which a class C franking credit has already arisen because of a previous application of this section.

Note:

For example, if the amended company tax assessment is the first or only amended assessment, subsection (6) will reverse any franking credit arising under subsection (5) in respect of the original company tax assessment, and franking credits and debits arising under subsections (8) and (10) for payments and refunds of company tax made between the serving of the original company tax assessment and the amended company tax assessment.

160AQKAD(7)   Franking credit on amended company tax assessment.  

On the day on which the amended company tax assessment is served on the company, a class C franking credit equal to the adjusted amount of the amount worked out using the following formula arises:

where:

amount of the company's liability to pay company tax for the eligible year of income that would normally give rise to franking credits
is the amount worked out for the company for that year under section 160AQKAB .

reduced liability to pay company tax
means the amount, after the reduction under section 160AQKAC is made, of the company's liability to pay company tax for the eligible year of income (worked out in accordance with the amended company tax assessment).

total payments of PAYG instalments and company tax less refunds
means the sum of all PAYG instalments and company tax for the eligible year of income paid by the company on or before the day on which the amended company tax assessment is served less the sum of all refunds of company tax for the eligible year of income received by the company on or before that day.

160AQKAD(8)   Franking credit on a payment made after original or amended company tax assessment.  

A class C franking credit arises if the company pays a PAYG instalment or company tax for the eligible year of income:

(a) in a case where the determination is made under subsection 160AQKAA(1) (a determination made as a result of the original company tax assessment for the eligible year of income) - after the day on which the original company tax assessment is served on the company and before the day on which the first or only amended company tax assessment (if any) is served on the company; and

(b) in a case where the determination is made under subsection 160AQKAA(3) (a determination made as a result of an amended company tax assessment for the eligible year of income) - after the day on which the amended company tax assessment is served on the company and before the day on which the next amended company tax assessment (if any) is served on the company.

160AQKAD(9)   [Class C franking credit]  

The class C franking credit arises on the day on which the payment is made and is equal to the adjusted amount of the amount worked out using the formula:

where:

amount of the company's liability to pay company tax for the eligible year of income that would normally give rise to franking credits
is the amount worked out for the company for that year under section 160AQKAB .

reduced liability to pay company tax
means the amount, after the reduction under section 160AQKAC is made, of the company's liability to pay company tax for the eligible year of income (worked out in accordance with the assessment that resulted in the most recent determination).

160AQKAD(10)   Franking debit on a refund received after original or amended company tax assessment.  

A class C franking debit arises if the company receives a refund of company tax for the eligible year of income:

(a) in a case where the determination is made under subsection 160AQKAA(1) (a determination made as a result of the original company tax assessment for the eligible year of income) - after the day on which the original company tax assessment is served on the company and before the day on which the first or only amended company tax assessment (if any) is served on the company; and

(b) in a case where the determination is made under subsection 160AQKAA(3) (a determination made as a result of an amended company tax assessment for the eligible year of income) - after the day on which the amended company tax assessment is served on the company and before the day on which the next amended company tax assessment (if any) is served on the company.

160AQKAD(11)   [Class C franking debit]  

The class C franking debit arises on the day on which the refund is received and is equal to the adjusted amount of the amount worked out using the following formula:

where:

amount of the company's liability to pay company tax for the eligible year of income that would normally give rise to franking credits
is the amount worked out for the company for that year under section 160AQKAB .

reduced liability to pay company tax
means the amount, after the reduction under section 160AQKAC is made, of the company's liability to pay company tax for the eligible year of income (worked out in accordance with the assessment that resulted in the most recent determination).