INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIAA - FRANKING OF DIVIDENDS  

Division 7B - Tainted share capital accounts  

Subdivision B - Companies other than life assurance companies  

SECTION 160ARDQ   CONSEQUENCES OF TAINTING SHARE CAPITAL ACCOUNT - AUTOMATIC FRANKING DEBIT  

160ARDQ(1)   [When debit arises]  

If a company transfers an amount to its share capital account from any of its other accounts, a class C franking debit of the company arises on the day of the transfer.

160ARDQ(2)   [Calculating amount of debit]  

The amount of the debit is equal to the amount (if any) that would be calculated under subsection 160AQDB(4) as the class C required franking amount for a frankable dividend if:

(a) the dividend were paid on that day to a shareholder in the company; and

(b) the amount of the dividend were equal to the amount transferred to the share capital account.

160ARDQ(3)   [Demutualisations]  

If:

(a) an amount or amounts are transferred as mentioned in subsection (1) in connection with the demutualisation of a mutual entity (other than a mutual entity formed by the merger of 2 or more mutual entities); and

(b) Division 326 applies to the demutualisation;

the following provisions have effect:

(c) where the amount or the sum of the amounts transferred does not exceed the total of the capital amounts:

(i) that were contributed to the entity by members of the entity before it was demutualised; and

(ii) in respect of which deductions are not allowable to the members; and

(iii) that were not payments for goods or services provided by the entity;

subsection (1) does not apply to the amount transferred;

(d) where the amount or the sum of the amounts transferred exceeds the total of those capital amounts - only the amount of the excess is to be treated for the purposes of this section as having been transferred.

160ARDQ(4)   [Demutualisations where entity formed by merger]  

If:

(a) an amount or amounts are transferred as mentioned in subsection (1) in connection with the demutualisation of a mutual entity formed by the merger of 2 or more mutual entities; and

(b) Division 326 applies to the demutualisation;

the following provisions have effect:

(c) where the amount or the sum of the amounts transferred does not exceed the total of the capital amounts:

(i) that were contributed to the demutualising entity before the completion of the demutualisation by persons who became members of that entity after the merger took place; and

(ii) in respect of which deductions are not allowable to those members; and

(iii) that were not payments for goods or services provided by that entity;

and the market values of the merging entities, as determined by a qualified valuer, at the time of the merger - subsection (1) does not apply to the amount transferred;

(d) where the amount or the sum of the amounts transferred exceeds the total of those capital amounts and market values - only the amount of the excess is to be treated for the purposes of this section as having been transferred.