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 160AQKAE   TRANSITIONAL - ADJUSTMENTS WHERE FRANKING YEAR ENDS BEFORE 4 MAY 1999  

160AQKAE(1)   When section applies.  

This section applies if:

(a) a life assurance company (the subsidiary company ) has become liable to pay one or more of the following in relation to a franking year that ends before 4 May 1999:

(i) class A franking deficit tax for the franking year;

(ii) class C franking deficit tax for the franking year;

(iii) class A deficit deferral tax in relation to the refund of one or more instalments paid during the franking year;

(iv) class C deficit deferral tax in relation to the refund of one or more instalments paid during the franking year; and

(b) some or all (the available deficit/deferral tax liability ) of that franking deficit tax or deficit deferral tax liability has not given rise to an entitlement to an offset under section 160AQK before 4 May 1999; and

(c) at all times during the period beginning at the start of the franking year and ending on the day on which an original assessment is made in relation to the subsidiary company in relation to the last year of income in which a liability mentioned in paragraph (a) arises:

(i) the subsidiary company was a wholly-owned subsidiary (as defined in section 121AP ) of another company (the holding company ); and

(ii) both companies were residents of Australia.

160AQKAE(2)   Consequences for the subsidiary company under this section.  

The subsidiary company is not entitled to an offset under section 160AQK in relation to the available deficit/deferral tax liability.

160AQKAE(3)   [Subsidiary company entitled to an offset]  

If:

(a) the subsidiary company satisfies in whole or in part (which whole or part is the deficit/deferral tax amount ) the available deficit/deferral tax liability; and

(b) on or after 4 May 1999:

(i) the Commissioner serves on the subsidiary company a notice of an original company tax assessment for an eligible year of income in which the company was sufficiently resident; or

(ii) the Commissioner serves on the subsidiary company a notice of an amended company tax assessment for an eligible year of income in which the company was sufficiently resident, being an amendment that increases the company tax of the company;

the Commissioner must determine that the subsidiary company is entitled to an offset in relation to the company tax, or increased company tax, equal to the amount specified in the determination.

160AQKAE(4)   [Amount of offset]  

The amount specified in the determination must be the lesser of the following amounts:

(a) the deficit/deferral tax amount, reduced by any part of it that has been previously applied under this section;

(b) the amount of the company tax or increased company tax, reduced by any foreign tax credits allowable in respect of tax paid or payable by the company in respect of income derived in the eligible year of income.

160AQKAE(5)   Company may claim offset.  

The subsidiary company may, for the purposes of making a claim for an offset under this section in relation to a year of income, determine:

(a) whether an offset is allowable to the subsidiary company; and

(b) if the subsidiary company determines that an offset is so allowable - the amount of the offset.

160AQKAE(6)   [Timing of claim]  

A claim under subsection (5) must be made on or after 4 May 1999 in the return furnished by the company in respect of income of that year of income or after the furnishing of that return.

160AQKAE(7)   Further consequences if a determination is made.  

If the subsidiary company is entitled to an offset under a determination made under this section:

(a) for the purposes of Division 2 of this Part, the subsidiary company is taken to have made a payment of company tax for the eligible year of income equal to the offset specified in the determination, and not to have satisfied the liability mentioned in paragraph (1)(a); and

(b) any franking credit or debit that arises because of that payment is taken to arise on 7 June 2001 or the day on which the subsidiary company first becomes entitled to offset an amount mentioned in paragraph (1)(a) against the subsidiary company's company tax, whichever is later.

160AQKAE(8)   Consequences for the holding company under this section.  

If this section applies, a class C franking debit arises for the holding company on 7 June 2001 or the day on which the subsidiary company first becomes entitled to offset an amount mentioned in paragraph (1)(a) against the subsidiary company's company tax, whichever is later. The amount of the franking debit is worked out using the formula:

Available deficit/deferral tax liability   ×

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160AQKAE(9)   [Effective date of operation]  

The section has effect as if it had come into operation on 4 May 1999. For that purpose:

(a) any claim for an offset made under section 160AQKA after 4 May 1999 but before the commencement of this section is taken to be a claim made under this section; and

(b) on the day on which any such claim under section 160AQKA was made, the Commissioner is taken to have made a determination under this section that the company making the claim is entitled to an offset of the amount claimed.