Transfer of FIF attributed tax account surpluses by section 717-245
Item	Section 717-245 operates in relation to this thing (within the meaning of Part XI of the Income Tax Assessment Act 1936):	In the same way as it operates in relation to this thing:
1	FIF attributed tax account surplus	Attribution surplus
2	*FIF	Attribution account entity
3	FIF attribution account percentage	Attribution account percentage
4	FIF attributed tax account credit	Attribution credit
5	FIF attributed tax account debit	Attribution debit

Note: Section 717-265 may affect the calculation of the FIF attributed tax account surplus for the FIF in relation to the head company just before the leaving time.

717-265 Calculating FIF income where a company leaves the group

(1) This section modifies the operation of Part XI of the Income Tax Assessment Act 1936 in relation to a company (the transferor company) if:

(a) the transferor company is the ^*head company of a ^*consolidated group at a time (the surplus time); and

(b) for the purposes of that Part, the FIF attribution account percentage of the transferor company in relation to a FIF attribution account entity that is a ^*FIF is more than nil at the surplus time; and

(c) another company (the leaving company) ceases to be a ^*subsidiary member of the group at the time (the leaving time) just after the surplus time; and

(d) for the purposes of that Part, the leaving company’s FIF attribution account percentage in relation to that FIF attribution account entity is more than nil at the leaving time.

(2) That Part operates in relation to the transferor company as if a notional accounting period of the ^*FIF in relation to the transferor company ended at the time (the credit/debit time) just before the surplus time.

(3) That Part operates in relation to the transferor company as if the next notional accounting period of the ^*FIF in relation to the transferor company started at the surplus time and continued until whichever of these times occurs first:

(a) the time when a notional accounting period of the FIF in relation to the transferor company would have ended apart from this section;

(b) the time when the period ends because of another application of this section.

(4) That Part operates in relation to the transferor company as if subsection 485(3) of that Act provided that the operative provision applied to the transferor company in relation to the ^*FIF in respect of the notional accounting period of that FIF that ended in the year of income that included the credit/debit time.

(5) Paragraph 538(2)(d) of that Act operates in relation to the leaving company in relation to the ^*FIF in respect of the notional accounting period of that FIF that included the leaving time as if:

(a) the leaving company had acquired the interest or interests mentioned in that paragraph during that period (so far as those interests are held by the leaving company because it ceased to be a ^*subsidiary member of the group); and

(b) the amount or value of the consideration paid or given by the leaving company in respect of the acquisition was equal to the amount worked out under paragraph 538(2)(a) of that Act in relation to the transferor company in relation to the FIF in respect of the notional accounting period mentioned in subsection (2) of this section.

Note: The modifications made by this section:

(a) apply if a company leaves a consolidated group during a notional accounting period of a FIF in which the company has an interest; and

(b) allow the appropriate calculation of amounts attributed under FIF rules to the transferor company and leaving company before and after the leaving time; and

(c) mean that foreign investment fund income that accrued to the transferor company from the FIF will be included in the transferor company’s assessable income and will give rise to a FIF attribution credit, and may also give rise to a FIF attribution debit, in relation to the transferor company; and

(d) mean that the FIF attribution surplus and the FIF attributed tax account surplus for the FIF attribution account entity in relation to the transferor company at the surplus time will take account of credits and debits arising at the credit/debit time and earlier.

[The next Division is Division 719.]

Schedule 7—Consolidation: application and transitional asset cost provisions

Income Tax (Transitional Provisions) Act 1997

1 Section 700-1

Repeal the section, substitute:

700-1 Application of Part 3-90 of Income Tax Assessment Act 1997

Part 3-90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Bill (No. 1) 2002 and amended by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, applies on and after 1 July 2002.

2 After Division 700

Insert:

Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002-3 and 2003-4 financial years

Table of Subdivisions

701-A Preliminary

701-B Modified application of provisions

Subdivision 701-A—Preliminary

Table of sections

701-1 Transitional group and transitional entity

701-5 Chosen transitional entity

701-10 Interpretation

701-1 Transitional group and transitional entity

Group formed on 1 July 2002

(1) If a consolidated group came into existence on 1 July 2002:

(a) the group is a transitional group; and

(b) each entity that became a subsidiary member of the group on the day it came into existence is a transitional entity.

Group formed after 1 July 2002 but before 1 July 2003

(2) If a consolidated group came into existence after 1 July 2002 but before 1 July 2003:

(a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and

(b) an entity is a transitional entity if:

(i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly-owned subsidiary of the entity (the future head company) that became the head company of the group; or

(ii) at some time during that period, the entity was a wholly-owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly-owned subsidiary of the future head company until the group came into existence.

Group formed during financial year starting on 1 July 2003

(3) If a consolidated group came into existence during the financial year starting on 1 July 2003:

(a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and

(b) an entity is a transitional entity if:

(i) just before 1 July 2003, it was a wholly-owned subsidiary of the future head company; and

(ii) it remained such from the earliest time after 1 July 2002 when it was a wholly-owned subsidiary of the future head company until the group came into existence.

701-5 Chosen transitional entity

(1) If a group is a transitional group, its head company may choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities.

Period for making choice

(2) The choice must be made by the end of the period described in subsection 703-50(3) for giving the Commissioner the choice under section 703-50 that the group is taken to be consolidated.

Choice is irrevocable

(3) The choice cannot be revoked.

701-10 Interpretation

A reference in this Division to:

(a) a provision of the Income Tax Assessment Act 1997; or

(b) a consolidated group’s allocable cost amount for an entity;

is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705-B of that Act and with this Division.

Subdivision 701-B—Modified application of provisions

Table of sections

701-15 Tax cost and trading stock value not set for assets of chosen transitional entities

701-20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities

701-25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities

701-30 Undistributed, unfrankable pre-formation profits of non-chosen transitional entities—adjustment to allocable cost amount and tax cost setting amount reduction for over-depreciated assets

701-35 CGT event for pre-formation roll-over after 16 May 2002 to be disregarded if cost base etc. would be different

701-40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over-depreciated assets

701-45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre-CGT assets

701-15 Tax cost and trading stock value not set for assets of chosen transitional entities

Section 701-10 (cost to head company of assets that entity brings into group) and subsection 701-35(4) (setting value of trading stock at tax-neutral amount) do not apply to the assets of a chosen transitional entity.

Note: The fact that the head company inherits the entity’s history under section 701-5 when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time.

701-20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities

When section applies

(1) This section applies if any of the transitional entities in the transitional group is a chosen transitional entity.

Allocable cost amount to be worked out in special way

(2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non-chosen subsidiary) is worked out in a special way.

How to work out allocable cost amount

(3) The allocable cost amount for each non-chosen subsidiary is the sum of:

(a) the head company adjusted allocable amount for the non-chosen subsidiary (see subsection (4)); and

(b) for each sub-group (see subsection (6)) that exists in relation to the non-chosen subsidiary—the sub-group’s notional allocable cost amount (see subsection(5)) for the non-chosen subsidiary.

Head company adjusted allocable amount

(4) The head company adjusted allocable amount for the non-chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if;

(a) the holding of all sub-group membership interests were disregarded; and

(b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705-60 was taken into account:

where:

market value of all membership interests in non-chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that are held by entities that become members of the group at that time.

market value of head company’s direct and indirect membership interests in non-chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub-group in relation to the non-chosen subsidiary.

Sub-group’s notional allocable cost amount

(5) For each sub-group that exists in relation to the non-chosen subsidiary, there is a sub-group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non-chosen subsidiary if:

(a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non-chosen subsidiary and the entities comprising the sub-group; and

(b) the chosen transitional entity in the sub-group were the head company of the consolidated group; and

(c) the only membership interests that any entity in the sub-group held in any other member of the consolidated group were the sub-group membership interests (see subsection (6)) in relation to the sub-group; and

(d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705-60 was taken into account:

where:

market value of all membership interests in non-chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that are held by entities that become members of the group at that time.

market value of chosen transitional entity’s direct and indirect membership interests in non-chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub-group.

Sub-group and sub-group membership interests

(6) If a chosen transitional entity holds membership interests in a non-chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non-chosen subsidiary:

(a) the chosen transitional entity and each interposed non-chosen subsidiary comprise a sub-group in relation to the non-chosen subsidiary (unless the non-chosen subsidiary is included in a sub-group in relation to another non-chosen subsidiary); and

(b) the following membership interests are the sub-group membership interests in relation to the sub-group:

(i) the membership interests that the chosen transitional entity holds directly in the non-chosen subsidiary or in any of the interposed non-chosen subsidiaries;

(ii) the membership interests that each interposed non-chosen subsidiary holds directly in the non-chosen subsidiary or in any of the other interposed non-chosen subsidiaries.

701-25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities

If any provision of this Act would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply.

Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred.

701-30 Undistributed, unfrankable pre-formation profits of non-chosen transitional entities—adjustment to allocable cost amount and tax cost setting amount reduction for over-depreciated assets

Application of section to non-chosen transitional entities where transitional group formed before 1 July 2003

(1) This section applies if the transitional group comes into existence before 1 July 2003. It applies to each transitional entity in the transitional group, other than a chosen transitional entity. This is so even if there are no chosen transitional entities at all.

Increase in step 3 of allocable cost amount on group formation

(2) The amount to be added under section 705-90 (step 3 of allocable cost amount) of the Income Tax Assessment Act 1997 in working out the transitional group’s allocable cost amount for the transitional entity is increased by the additional undistributed profits (the step 3 unfrankable profits increase) that would form part of the step 3 amount under that section if:

(a) subsections (3) and (4), and paragraph (6)(b), of that section were disregarded; and

(b) it were a requirement of that section that, if any additional undistributed profits resulting from paragraph (a) of this subsection were distributed as dividends just before the group came into existence, the head company and each other transitional entity interposed between the head company and the transitional entity would be entitled to a rebate of income tax under section 46 or 46A of the Income Tax Assessment Act 1936 on the dividends.

Increase in tax deferral amount in relation to over-depreciated assets

(3) The tax deferral amount for the purposes of applying section 705-50 (reduction in tax cost setting amount for over-depreciated assets) of the Income Tax Assessment Act 1997 in relation to an asset of the transitional entity that becomes that of the head company under subsection 701-1(1) (the single entity rule) of that Act when the transitional group comes into existence is increased by the amount worked out under subsection (4) of this section.

Amount of increase in tax deferral amount

(4) The increase is equal to the amount that would have been the step 3 unfrankable profits increase if the undistributed profits constituting that increase were also required to satisfy the following requirements:

(a) the profits were not subject to income tax because of deductions for the asset’s decline in value;

(b) the decline in value represented the over-depreciation of the asset;

(c) the deductions for the decline in value do not form part of a tax loss covered by the step 5 amount mentioned in step 5 in the table in section 705-60 of the Income Tax Assessment Act 1997 in working out the transitional group’s allocable cost amount for the transitional entity.

701-35 CGT event for pre-formation roll-over after 16 May 2002 to be disregarded if cost base etc. would be different

If:

(a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset for which there was:

(i) a roll-over under Subdivision 126-B of the Income Tax Assessment Act 1997; or

(ii) roll-over relief under section 40-340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and

(b) the cost base or reduced cost base of that asset or any other asset that:

(i) became an asset of the head company when the transitional group came into existence because subsection 701-1(1) (the single entity rule) of that Act applies; or

(ii) was otherwise an asset of the head company at that time;

differs at that time from what it would have been if the roll-over had not occurred or there had been no such roll-over relief;

then Part 3-90 of the Income Tax Assessment 1997 applies as if the CGT event had not happened.

701-40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over-depreciated assets

(1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (5) are satisfied.

Asset held at leaving time

(2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701-1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset.

Reduction of asset’s tax cost setting amount for over-depreciation

(3) When the transitional group came into existence:

(a) the asset must have become that of the head company of the transitional group because subsection 701-1(1) of that Act applied in relation to a transitional entity; and

(b) section 705-50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset.

Asset held continuously within group

(4) The asset must, disregarding subsection 701-1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group.

Head company’s advice to leaving entity

(5) Before the entity ceases to be a subsidiary member of the transitional group, the head company must have advised the entity of the amount that the head company proposes to choose under subsection (6) of this section in relation to the asset.

Note: This information would need to be known by the entity if it later becomes a subsidiary member of another consolidated group and still holds the asset. This is because subsection 705-50(5) of the Income Tax Assessment Act 1997 requires a reduction in the tax cost setting amount for the asset on joining that other group and the amount chosen by the head company under this section is relevant to working out that reduction.

Head company’s choice

(6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711-20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses.

701-45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre-CGT assets

(1) This section applies if:

(a) an entity ceases to be a subsidiary member of the transitional group; and

(b) just before the transitional group came into existence, the entity that became the head company held a pre-CGT asset; and

(c) that holding of the asset did not occur as a result of a CGT event:

(i) for which there was a roll-over under Subdivision 126-B of the Income Tax Assessment Act 1997; and

(ii) that occurred after 11.45 am by legal time in the Australian Capital Territory on 21 September 1999; and

(d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre-CGT asset and is held by the head company only because the entity is taken by subsection 701-1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company.

(2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711-20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence.

Division 702—Modified application of this Act to assets that an entity brings into a consolidated group

Table of sections

702-1 Modified application of section 40-77 of this Act to assets that an entity brings into a consolidated group

702-5 Modified application of subsection 40-285(6) of this Act after entity brings assets into consolidated group

702-1 Modified application of section 40-77 of this Act to assets that an entity brings into a consolidated group

(1) This section applies if:

(a) an entity becomes a subsidiary member of a consolidated group; and

(b) just before it does so, section 40-77 of this Act applies to an asset that it holds.

(2) For so long as the asset continues to be:

(a) an asset of the head company because subsection 701-1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or

(b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group;

then, despite certain provisions of that Act applying, in accordance with subsection 701-55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount:

(c) subsection 40-77(1) continues to apply to the asset; and

Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right.

(d) subsection 40-77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and

(e) subsection 40-77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40-285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount.

702-5 Modified application of subsection 40-285(6) of this Act after entity brings assets into consolidated group

If:

(a) an entity becomes a subsidiary member of a consolidated group; and

(b) because subsection 701-1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and

(c) a balancing adjustment event happens in relation to the asset while it is an asset of the head company;

subsection 40-285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701-10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997.

Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997.

Schedule 8—Consolidation: amendment of transitional provisions for losses

Income Tax (Transitional Provisions) Act 1997

1 Paragraph 707-325(1)(a)

Omit “increase”, substitute “work out”.

2 Subsection 707-325(3) (heading)

Repeal the heading, substitute:

Adding to the modified market value of the real loss-maker

3 Subsection 707-325(3)

Omit “the modified market value of the real loss-maker at the initial transfer time were increased by”, substitute “there were added to the modified market value of the real loss-maker at the initial transfer time”.

4 At the end of subsection 707-325(3)

Add:

Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707-327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss-maker to the transferee.

5 Subsection 707-325(5) (heading)

Repeal the heading, substitute:

Choice to work out available fraction using this section

6 Subsection 707-325(5)

Omit “increase”, substitute “work out”.

7 Paragraph 707-327(1)(a)

Repeal the paragraph, substitute:

(a) the available fraction for a bundle of other losses is worked out, because of section 707-325, as if there were added to the modified market value of the real loss-maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and

8 At the end of subsection 707-327(1)

Add:

Note: This section has effect even if the amount added to the real loss-maker’s modified market value under section 707-325 is nil because the value donor’s modified market value is nil.

9 Paragraph 707-327(2)(b)

Repeal the paragraph, substitute:

(b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707-325, as if there were added to the real loss-maker’s modified market value an amount worked out by reference to the company.

10 Subsection 707-327(6) (note)

Omit “working out an increased available fraction for a bundle of losses under section 707-325”, substitute “section 707-325 to apply in relation to the working out of the available fraction for a bundle of losses”.

Schedule 9—Consolidation: transitional provisions for international tax

Income Tax (Transitional Provisions) Act 1997

1 Section 707-405 (link note)

Repeal the link note, substitute:

[The next Division is Division 717.]

2 At the end of Part 3-90

Add:

Division 717—International tax rules

717-15 Head company’s accelerated access to joining entity’s excess foreign tax credits from earlier years

(1) This section operates in relation to an income year if:

(a) a consolidated group came into existence during an income year (the current year); and

(b) the current year ended before 1 July 2004; and

(c) section 160AFE of the Income Tax Assessment Act 1936 as amended by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 applies in relation to the head company of the consolidated group for the current year; and

(d) an entity (the joining entity) became a subsidiary member of a consolidated group at a time (the joining time) during the current year; and

(e) the condition in subsection (2) is satisfied.

(2) The condition is that the joining entity and the head company of the group were members of the same wholly-owned group:

(a) if the joining time was the start of the current year or the time the joining entity came into existence—at the joining time; or

(b) otherwise—throughout the period:

(i) beginning at the start of the current year, or the time the joining entity came into existence (whichever is later); and

(ii) ending at the joining time.

(3) For the purposes of section 717-15 of the Income Tax Assessment Act 1997 in relation to the current year, the reference in subparagraph 717-15(1)(b)(i) of that Act to the start of that income year is taken to be a reference to the end of that income year.

717-20 Head company’s accelerated access to joining entity’s excess foreign tax credits from joining year

(1) This section operates if:

(a) a consolidated group came into existence during an income year (the current year); and

(b) the current year ended before 1 July 2004; and

(c) section 160AFE of the Income Tax Assessment Act 1936 as amended by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 applies in relation to the head company of the consolidated group for the current year; and

(d) an entity (the joining entity) became a subsidiary member of the consolidated group at a time (the joining time) during the current year; and

(e) the condition in subsection (2) is satisfied; and

(f) the joining entity had excess foreign tax credits from the earliest non-membership period (under section 701-30 of the Income Tax Assessment Act 1997) in the current year.

(2) The condition is that the joining entity and the head company of the consolidated group were members of the same wholly-owned group:

(a) if the joining time was the start of the current year or the time the joining entity came into existence—at the joining time; or

(b) otherwise—throughout the period:

(i) beginning at the start of the current year, or the time the joining entity came into existence (whichever is later); and

(ii) ending at the joining time.

(3) Section 160AFE of the Income Tax Assessment Act 1936 operates in relation to the head company of the consolidated group for the current year as if:

(a) subsection 160AFE(4) of that Act provided that the amount of the excess foreign tax credits mentioned in paragraph (1)(f) of this section was the amount of the head company’s excess foreign tax credits from an earlier year of income (the notional year); and

(b) paragraphs 160AFE(3)(a) and (b) of that Act provided that the excess foreign tax credits from the notional year should be applied before the other credits mentioned in those paragraphs.

717-25 No double counting of foreign tax

To avoid doubt, sections 717-15 and 717-20 do not operate so as to result in an amount of foreign tax (within the meaning of the Income Tax Assessment Act 1936) being counted twice for the purposes of section 160AF of that Act.

[The next Division is Division 820.]

Schedule 10—Consolidation: consequential provisions for international tax

Income Tax Assessment Act 1936

1 Section 160AFE

Repeal the section, substitute:

160AFE Carrying forward excess foreign tax credits

(1) This section operates if the amount (the current foreign tax amount) worked out under paragraph 160AF(1)(c) for a taxpayer for a year of income (the current year) falls short of the amount worked out under paragraph 160AF(1)(d) for the taxpayer for the current year.

(2) The taxpayer’s excess foreign tax credits from earlier years of income (see subsection (4)) are applied in accordance with subsection (3) to increase the current foreign tax amount.

(3) Apply those credits according to the following rules:

(a) only apply credits from the most recent 5 years of income ending before the current year;

(b) apply credits from an earlier year of income before applying credits for a later year of income;

(c) do not apply credits beyond the extent of the shortfall mentioned in subsection (1);

(d) do not apply credits to the extent that the credits have already been applied under a previous operation of this section.

(4) The taxpayer has excess foreign tax credits from an earlier year of income (the earlier year) if the amount worked out under paragraph 160AF(1)(c) for the taxpayer for the earlier year exceeds the amount worked out under paragraph 160AF(1)(d) for the taxpayer for the earlier year. The amount of the credits equals the excess.

(5) This section operates separately in relation to each class of foreign income identified in subsection 160AF(7), as if the taxpayer’s foreign income of that class for a year of income were the whole of the taxpayer’s foreign income for that year.

2 Basic rule about application of section 160AFE

(1) Section 160AFE of the Income Tax Assessment Act 1936 as amended by this Schedule applies in relation to a taxpayer for each of its:

(a) income years starting after 30 June 2003; and

(b) non-membership periods (if any) under section 701-30 of the Income Tax Assessment Act 1997 starting after 30 June 2003.

(2) This item does not apply in relation to a taxpayer to which item 3 applies.

3 Different application for members of certain groups

(1) This item applies to a taxpayer if:

(a) the taxpayer becomes a member of a consolidated group or MEC group on the day (the consolidation day) the group comes into existence; and

(b) the consolidation day either is before 1 July 2003 or is both:

(i) the first day of the first income year starting after 30 June 2003 of the group’s head company (for a consolidated group) or provisional head company (for a MEC group) on the consolidation day; and

(ii) before 1 July 2004; and

(c) the taxpayer was not a member of a consolidated group or MEC group before the consolidation day.

(2) Section 160AFE of the Income Tax Assessment Act 1936 as amended by this Schedule applies in relation to the taxpayer for each of its:

(a) income years starting on or after the consolidation day; and

(b) non-membership periods (if any) under section 701-30 of the Income Tax Assessment Act 1997 starting on or after the consolidation day.

4 Transitional provision for section 160AFE

For the purposes of paragraph 160AFE(3)(d) of the Income Tax Assessment Act 1936 as in force immediately after the commencement of this Schedule, take account of an amount utilised or applied under section 160AFE of that Act as in force either before or after that commencement for a year of income ending before or after that commencement.

Schedule 11—Consolidation: amendment of transitional provision about limiting access to group concessions

New Business Tax System (Consolidation) Act (No. 1) 2002

1 Subitem 39(9) of Schedule 3

Omit “in the same way as they apply in relation to”, substitute “as if it were”.

Schedule 12—Consolidation: amendments of Dictionary

Income Tax Assessment Act 1997

1 Subsection 995-1(1)

Insert:

excess foreign tax credits has the meaning given by subsection 160AFE(4) of the Income Tax Assessment Act 1936.

Schedule 13—Exempting entities and former exempting entities

Income Tax Assessment Act 1997

1 Paragraph 204-30(3)(b)

Repeal the paragraph, substitute:

(b) that a specified ^*exempting debit arises in the ^*exempting account of the entity, for a specified ^*distribution or other benefit to a disadvantaged member;

(c) that no ^*imputation benefit is to arise in respect of a distribution that is made to a favoured member and specified in the determination.

2 Subsection 204-30(4)

Repeal the subsection, substitute:

(4) The Commissioner may:

(a) specify the ^*franking debit under paragraph (3)(a) by specifying the ^*franking percentage to be used in working out the amount of the debit; and

(b) specify the ^*exempting debit under paragraph (3)(b) by specifying the ^*exempting percentage to be used in working out the amount of the debit.

3 Subsection 204-30(5)

Omit “or (b)”, substitute “, (b) or (c)”.

4 Paragraph 204-30(6)(d)

Repeal the paragraph, substitute:

(d) an ^*exempting credit would arise in the ^*exempting account of the member as a result of the distribution; or

(e) the member would not be liable to pay ^*withholding tax on the distribution, because of the operation of paragraph 128B(3)(ga) of the Income Tax Assessment Act 1936.

5 At the end of subsection 204-30(8)

Add:

; (f) the other member is an ^*exempting entity.

6 At the end of section 204-30

Add:

(9) A ^*member of an entity derives a greater benefit from franking credits than another member of the entity if any of the following circumstances exist in relation to the first member in the income year in which the ^*distribution giving rise to the benefit is made, and not in relation to the other member:

(a) a ^*franking credit arises for the first member under item 5, 6 or 7 of the table in section 208-130 (distributions by ^*exempting entities to exempting entities);

(b) a franking credit or ^*exempting credit arises for the first member because the distribution is ^*franked with an exempting credit;

(c) the first member is entitled to a ^*tax offset because:

(i) the distribution is a ^*franked distribution made by an exempting entity; or

(ii) the distribution is ^*franked with an exempting credit.

7 At the end of section 204-35

Add:

(2) If the Commissioner makes a determination giving rise to an ^*exempting debit in the ^*exempting account of an entity under paragraph 204-30(3)(b), the debit arises in the exempting account of the entity on the day on which the notice of determination is given to the entity in accordance with section 204-50.

8 After section 204-40

Insert:

204-41 Amount of the exempting debit

The amount of the ^*exempting debit arising because of a determination by the Commissioner under paragraph 204-30(3)(b) must not exceed:

(a) if the specified ^*distribution has been ^*franked with an exempting credit—the difference between the amount of the ^*exempting credit on the distribution and an amount worked out by multiplying the amount of the distribution by the highest ^*exempting percentage at which a distribution to a favoured member is franked; or

(b) if the specified distribution, although ^*frankable, has not been franked with an exempting credit—an amount worked out by multiplying the amount of the distribution by the highest exempting percentage at which a distribution to a favoured member is franked; or

(c) if the specified distribution is ^*unfrankable—an amount worked out by multiplying the amount of the distribution by the highest exempting percentage at which a distribution to a favoured member is franked; or

(d) if the specified benefit is the issue of bonus shares from a share premium account—an amount worked out by multiplying the amount debited to the share premium account in respect of the bonus shares by the highest exempting percentage at which a distribution to a favoured member is franked; or

(e) if some other benefit is specified—an amount worked out by multiplying the value of the benefit by the highest exempting percentage at which a distribution to a favoured member is franked.

9 Section 204-45

Omit “paragraph 204-30(3)(b)”, substitute “paragraph 204-30(3)(c)”.

10 Paragraph 204-50(2)(b)

Repeal the paragraph, substitute:

(b) in a case where the Commissioner determines that an ^*exempting debit is to arise in the ^*exempting account of an entity under paragraph 204-30(3)(b)—to the entity; and

(c) in a case where a favoured member is denied an ^*imputation benefit under paragraph 204-30(3)(c)—to the favoured member.

11 Subsection 204-50(3)

Omit “paragraph 204-30(3)(b)”, substitute “paragraph 204-30(3)(c)”.

12 Section 205-25

Omit “specified in the table in section 205-15 or 205-30”, substitute “specified in a relevant table”.

13 At the end of section 205-25

Add:

(2) The tables in sections 205-15 and 205-30 are relevant for the purposes of subsection (1).

14 Section 207-75

Omit “^*franked distribution”, substitute “^*distribution”.

15 After Division 207

Insert:

Division 208—Exempting entities and former exempting entities

Table of Subdivisions

Guide to Division 208

208-A What are exempting entities and former exempting entities?

208-B Franking with an exempting credit

208-C Amount of the exempting credit on a distribution

208-D Distribution statements

208-E Distributions to be franked with exempting credits to the same extent

208-F Exempting accounts and franking accounts of exempting entities and former exempting entities

208-G Tax effects of distributions by exempting entities

208-H Tax effect of a distribution franked with an exempting credit

Guide to Division 208

Table of sections

208-5 What is an exempting entity?

208-10 Former exempting entities

208-15 Distributions by exempting entities and former exempting entities

208-5 What is an exempting entity?

(1) An exempting entity is a corporate tax entity that is effectively owned by entities that, either because they are not Australian residents or because they receive distributions as exempt income, would not be able to fully utilise franking credits on distributions by the corporate tax entity.

(2) In deciding whether a corporate tax entity is effectively owned by such entities, these rules:

(a) look at the membership interests in the entity that involve the holder of the interest in bearing the risks and accruing the opportunities of ownership of the entity; and

(b) ask whether at least 95% of those membership interests, and 95% of any interests in those membership interests, are held by Australian residents or entities that receive distributions as exempt income.

208-10 Former exempting entities

When an entity ceases to be an exempting entity, it becomes a former exempting entity.

208-15 Distributions by exempting entities and former exempting entities

To ensure that franking credits accumulated by an exempting entity are not the target of franking credit trading, these rules:

(a) limit the circumstances in which a distribution franked with those credits can give rise to benefits under the imputation system; and

(b) quarantine those credits by moving them into a separate account, called the exempting account, when the entity ceases to be an exempting entity; and

(c) deny a recipient of a distribution franked with a credit from that account any benefit under the imputation system as a result of that distribution, unless the recipient was a member of the entity immediately before it became a former exempting entity.

Subdivision 208-A—What are exempting entities and former exempting entities?

Table of sections

208-20 Exempting entities

208-25 Effective ownership of entity by prescribed persons

208-30 Accountable membership interests

208-35 Accountable partial interests

208-40 Prescribed persons

208-45 Persons who are taken to be prescribed persons

208-50 Former exempting companies

208-20 Exempting entities

A ^*corporate tax entity is an exempting entity at a particular time if, at that time, the entity is effectively owned by prescribed persons.

Note: Prescribed persons are identified in sections 208-40 and 208-45.

208-25 Effective ownership of entity by prescribed persons

(1) An entity is effectively owned by prescribed persons at a particular time if:

(a) at that time:

(i) not less than 95% of the ^*accountable membership interests in the entity; or

(ii) not less than 95% of the ^*accountable partial interests in the entity;

are held by, or held indirectly for the benefit of, prescribed persons; or

(b) paragraph (a) does not apply but it would nevertheless be reasonable to conclude that, at that time, the risks involved in, and the opportunities resulting from, holding accountable membership interests, or accountable partial interests, in the entity that are not held by, or directly or indirectly for the benefit of, prescribed persons are substantially borne by, or substantially accrue to, prescribed persons.

(2) In deciding whether it would be reasonable to conclude as mentioned in paragraph (1)(b):

(a) have regard to any ^*arrangement in respect of ^*membership interests (including unissued membership interests), or in respect of ^*partial interests, in the entity (including any derivatives held or issued in connection with those membership interests or partial interests) of which the entity is aware; but

(b) do not have regard to risks involved in the ownership of membership interests, or partial interests, in the entity that are substantially borne by any person in the person’s capacity as a secured creditor.

(3) An entity has a partial interest in a ^*corporate tax entity if it has an interest in a ^*membership interest in the corporate tax entity.

208-30 Accountable membership interests

(1) The purpose of this section is to identify which ^*membership interests in an entity are relevant in determining whether the entity is effectively owned by prescribed persons.

(2) A ^*membership interest in an entity is an accountable membership interest if it is not an excluded membership interest.

(3) A ^*membership interest in an entity is an excluded membership interest if, having regard to:

(a) the purposes for which the membership interest was issued; and

(b) any special or limited rights connected with, arising from, or attached to:

(i) the membership interest; or

(ii) other membership interests in the entity held by the holder of the membership interest; or

(iii) membership interests in the entity held by persons other than the holder of the membership interest; or

(iv) interests in any of the above;

including rights that are conferred or exercisable only if the holder of the membership interest or interests concerned is, or is not, a prescribed person; and

(c) the extent to which any such special or limited rights are similar to or differ from the rights that are normally attached to the ownership of ^*ordinary membership interests in ^*corporate tax entities; and

(d) the relationship between the value of the membership interest and the value of the entity; and

(e) any relationship or connection (whether of a personal or business nature) between holders of membership interests in the entity of which the entity is aware; and

(f) any ^*arrangement in respect of membership interests (including unissued membership interests) in the entity, or interests in membership interests in the entity, of which the entity is aware;

it would be reasonable to conclude that the membership interest is not relevant in determining whether the entity is effectively owned by prescribed persons because holding the membership interest does not involve the holder bearing the risks, or result in the accrual to the holder of the opportunities, of ownership of the entity that ordinarily arise from, or are ordinarily attached to, the holding of ordinary membership interests in an entity.

(4) In applying subsection (3), the fact that a person is a trustee is to be disregarded.

(5) Without limiting subsection (3), a ^*membership interest in an entity held by a person who is not a prescribed person is an excluded membership interest if:

(a) it is a finance membership interest; or

(b) it is a distribution access membership interest; or

(c) it does not carry the right to receive distributions; or

(d) it was issued, transferred or acquired for a purpose (other than an incidental purpose) of ensuring that the entity is not effectively owned by prescribed persons.

(6) A ^*membership interest is a finance membership interest if:

(a) the membership interest is a ^*non-equity share in the entity; or

(b) having regard to the rights attached to the membership interest and to any ^*arrangement with respect to the membership interest of which the entity is aware, the membership interest is equivalent to a debt owed by the entity to the holder of the membership interest.

(7) A ^*membership interest to which subsection (6) does not apply is a finance membership interest if:

(a) the manner in which the ^*distributions payable in respect of the membership interest are calculated, and the conditions applying to the payment of such distributions, indicate that the distributions paid are equivalent to the receipt by the person to whom they are paid of interest or an amount in the nature of or similar to interest; or

(b) the capital invested by the holder of the membership interest will be redeemed or, because of an ^*arrangement between the holder and the entity or an ^*associate of the entity, it is reasonable for the holder to expect that the capital will be redeemed, for an amount that is not less than, or for property (including other membership interests in the entity) the value of which is not less than, the amount paid for the membership interest; or

(c) the membership interest is redeemable by the entity by payment of a lump sum or by the transfer of property, or the membership interest has a preferred right to a repayment of capital on a winding up, where the amount of the lump sum or the value of the property, or the amount of the capital to be repaid, as the case may be, is to be calculated by reference to an implicit interest rate.

(8) A ^*membership interest in an entity is a distribution access membership interest if, having regard to:

(a) the terms of the issue of the membership interest, including any guarantee of payment of distributions; and

(b) the amounts of the ^*distributions paid on the membership interest relative to the issue price of the membership interest; and

(c) whether there is any guaranteed rate at which ^*franked distributions are to be paid on the membership interest; and

(d) the duration of the period within which the membership interest was issued; and

(e) the rights attached to other membership interests in the entity; and

(f) any other relevant matters;

it could be concluded that the membership interest was issued only for the purpose of paying distributions to the holder of the membership interest.

208-35 Accountable partial interests

(1) The purpose of this section is to identify which ^*partial interests in an entity are relevant in determining whether the entity is effectively owned by prescribed persons.

(2) A ^*partial interest in an entity is an accountable partial interest if it is not an excluded partial interest.

(3) A ^*partial interest in an entity is an excluded partial interest if, having regard to:

(a) the purposes for which the interest was granted; and

(b) the nature of the interest; and

(c) any special or limited rights connected with or arising from:

(i) the interest; or

(ii) other ^*membership interests, or partial interests, in the entity held by the holder of the interest; or

(iii) membership interests, or partial interests, in the entity held by persons other than the holder of the interest;

including rights that are conferred or exercisable only if the holder of the membership interests or partial interests concerned is, or is not, a prescribed person; and

(d) the extent to which the interest is similar to or differs from beneficial ownership; and

(e) the relationship between the value of the interest and the value of the entity; and

(f) any relationship or connection (whether of a personal or business nature) between holders of partial interests in the entity, and the holders of membership interests in the entity, of which the entity is aware; and

(g) any ^*arrangement in respect of membership interests (including unissued membership interests) in the entity, or partial interests in the entity, of which the entity is aware;

it would be reasonable to conclude that the partial interest is not relevant in determining whether the entity is effectively owned by prescribed persons because holding the membership interest to which the partial interest relates does not involve the holder bearing the risks, or result in the accrual to the holder of the opportunities, of ownership of the entity that ordinarily arise from, or are ordinarily attached to, the holding of ^*ordinary membership interests in an entity.

(4) In applying subsection (3), the fact that a person is a trustee is to be disregarded.

(5) Without limiting subsection (3), a ^*partial interest in an entity is also an excluded partial interest if it was granted or otherwise created, or was transferred or acquired, for a purpose (other than an incidental purpose) of ensuring that the entity is not effectively owned by prescribed persons.

208-40 Prescribed persons

(1) A company is a prescribed person in relation to another ^*corporate tax entity if:

(a) the company is not an ^*Australian resident; or

(b) were the company to receive a ^*distribution made by the other corporate tax entity, the distribution would be ^*exempt income of the company.

(2) A trustee is a prescribed person in relation to a ^*corporate tax entity if:

(a) all the beneficiaries in the trust are prescribed persons under other provisions of this section; or

(b) were the trustee to receive a ^*distribution made by the corporate tax entity, the distribution would be ^*exempt income of the trust estate.

(3) A ^*partnership is a prescribed person in relation to a ^*corporate tax entity if:

(a) all the partners are prescribed persons under other provisions of this section; or

(b) were the partnership to receive a ^*distribution made by the corporate tax entity, the distribution would be ^*exempt income of the partnership.

(4) An individual (other than a trustee) is a prescribed person in relation to a ^*corporate tax entity if:

(a) he or she is not an ^*Australian resident; or

(b) were he or she to receive a ^*distribution made by the corporate tax entity, the distribution would be ^*exempt income of the individual.

(5) The Commonwealth, each of the States, the Australian Capital Territory, the Northern Territory and Norfolk Island are prescribed persons in relation to any ^*corporate tax entity.

208-45 Persons who are taken to be prescribed persons

(1) This section applies to a person that:

(a) is a ^*company, a trustee, or a ^*partnership, that holds ^*membership interests (whether ^*accountable membership interests or excluded membership interests), or ^*partial interests (whether ^*accountable partial interests or excluded partial interests), in a ^*corporate tax entity (the relevant entity); and

(b) is not a prescribed person under section 208-40.

(2) A ^*company that holds ^*membership interests, or ^*partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if the risks involved in, and the opportunities resulting from, holding the membership interests or partial interests are substantially borne by, or substantially accrue to, as the case may be, one or more prescribed persons.

(3) A trustee of a trust who holds ^*membership interests, or ^*partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if the risks involved in, and the opportunities resulting from, holding the membership interests or partial interests are substantially borne by, or substantially accrue to, as the case may be, one or more prescribed persons.

(4) A trustee of a trust who holds ^*membership interests, or ^*partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if:

(a) unless subsection (7) applies, the trust is controlled by one or more persons who are prescribed persons; or

(b) all the beneficiaries who are presently entitled to, or during the relevant year of income become presently entitled to, income from the trust are prescribed persons.

(5) In determining whether subsection (3) or (4) applies in respect of a trust that is controlled by a person, have regard to the way in which the person, or any ^*associate of the person, exercises powers in relation to the trust.

(6) A person controls a trust if:

(a) the person has the power, either directly, or indirectly through one or more interposed entities, to control the application of the income, or the distribution of the property, of the trust; or

(b) the person has the power, either directly, or indirectly through one or more entities, to appoint or remove the trustee of the trust; or

(c) the person has the power, either directly, or indirectly through one or more entities, to appoint or remove beneficiaries of the trust; or

(d) the trustee of the trust is accustomed or under an obligation, whether formal or informal, to act according to the directions, instructions or wishes of the person or of an ^*associate of the person.

(7) Paragraph (4)(a) does not apply in relation to a trust if some of the beneficiaries receiving income from the trust are not prescribed persons and the Commissioner considers that it is reasonable to conclude that the risks involved in, and the opportunities resulting from, holding the ^*membership interests or ^*partial interests in the relevant entity are substantially borne by, or substantially accrue to, as the case may be, one or more persons who are not prescribed persons.

(8) A ^*partnership that holds ^*membership interests, or ^*partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if the risks involved in, and the opportunities resulting from, holding the membership interests or partial interests are substantially borne by, or substantially accrue to, as the case may be, one or more prescribed persons.

(9) If any of the prescribed persons referred to in subsection (2), (3), (4) or (8) is a ^*corporate tax entity, that subsection applies even if the risks involved in, and the opportunities resulting from, holding any of the ^*membership interests, or ^*partial interests, in that entity are substantially borne by, or substantially accrue to, as the case may be, one or more persons who are not prescribed persons.

208-50 Former exempting companies

(1) Subject to subsection (2), a ^*corporate tax entity is a former exempting entity if it has, at any time, ceased to be an ^*exempting entity and is not again an exempting entity.

(2) If an entity that, at any time, becomes effectively owned by prescribed persons ceases to be so effectively owned within 12 months after that time, the entity is not taken, by so ceasing, to become a former exempting entity.

Subdivision 208-B—Franking with an exempting credit
Guide to Subdivision 208-B

208-55 What this Subdivision is about

If a former exempting entity makes a distribution in circumstances where it could be franked, the entity can frank the distribution with an exempting credit.

Table of sections

Operative provisions

208-60 Franking with an exempting credit

[This is the end of the Guide.]

Operative provisions

208-60 Franking with an exempting credit

An entity franks a ^*distribution with an exempting credit if:

(a) the entity is a ^*former exempting entity when the distribution is made; and

(b) the entity is a ^*franking entity that satisfies the ^*residency requirement when the distribution is made; and

(c) the distribution is a ^*frankable distribution; and

(d) the entity allocates an ^*exempting credit to the distribution.

Note: The residency requirement for an entity making a distribution is set out in section 202-20.

Subdivision 208-C—Amount of the exempting credit on a distribution
Guide to Subdivision 208-C

208-65 What this Subdivision is about

The amount of the exempting credit on a distribution is that stated in the distribution statement, unless the amount stated exceeds the maximum franking credit for the distribution. In that case, it is nil.

Table of sections

Operative provisions

208-70 Amount of the exempting credit on a distribution

[This is the end of the Guide.]

Operative provisions

208-70 Amount of the exempting credit on a distribution

(1) Subject to subsection (2), the amount of the ^*exempting credit on a ^*distribution is that stated in the ^*distribution statement for the distribution.

(2) If the sum of the ^*franking credit and the ^*exempting credit stated in the ^*distribution statement for a ^*distribution exceeds the ^*maximum franking credit for the distribution, the amount of the exempting credit on the distribution is taken to be nil.

Note: If the franking credit stated in the distribution statement exceeds the maximum franking credit for the distribution, the amount of the franking credit on the distribution is taken to equal that maximum under section 202-65.

Subdivision 208-D—Distribution statements
Guide to Subdivision 208-D

208-75 Guide to Subdivision 208-D

Former exempting entities and exempting entities that make certain distributions must provide additional information in the distribution statement given to the recipient.

Table of sections

Operative provisions

208-80 Additional information to be included by a former exempting entity or exempting entity

[This is the end of the Guide.]

Operative provisions

208-80 Additional information to be included by a former exempting entity or exempting entity

(1) A ^*former exempting entity that makes a ^*distribution ^*franked with an exempting credit must include in the ^*distribution statement given to the recipient, a statement that there is an ^*exempting credit of a specified amount on the distribution.

(2) An ^*exempting entity that makes a ^*frankable distribution to a ^*member must include in the ^*distribution statement given to the member, a statement to the effect that members who are ^*Australian residents are not entitled to a ^*tax offset or ^*franking credit as a result of the distribution, except for certain ^*corporate tax entities, and employees who receive the distribution in connection with certain ^*employee share schemes.

(3) If, under subsection (1) or (2), a statement must be included in a ^*distribution statement, the distribution statement is taken not to have been given unless the statement is included.

Subdivision 208-E—Distributions to be franked with exempting credits to the same extent
Guide to Subdivision 208-E

208-85 What this Subdivision is about

All frankable distributions made within a franking period must be franked to the same extent with an exempting credit.

Table of sections

Operative provisions

208-90 All frankable distributions made within a franking period must be franked to the same extent with an exempting credit

208-95 Exempting percentage

208-100 Consequences of breaching the rule in section 208-90

[This is the end of the Guide.]

Operative provisions

208-90 All frankable distributions made within a franking period must be franked to the same extent with an exempting credit

(1) If an entity ^*franks a ^*distribution with an exempting credit, it must frank each other ^*frankable distribution made within the same ^*franking period with an exempting credit worked out at the same ^*exempting percentage.

(2) If an entity is not a ^*former exempting entity for the whole of a ^*franking period (the longer period), then, for the purposes of subsection (1), each period within that longer period during which the entity is a former exempting entity is taken to be a franking period.

208-95 Exempting percentage

The exempting percentage for a ^*frankable distribution is worked out using the formula:

208-100 Consequences of breaching the rule in section 208-90

If an entity ^*franks a ^*distribution with an exempting credit in breach of section 208-90:

(a) that distribution is taken not to have been franked with an exempting credit; and

(b) each other ^*frankable distribution made by the entity within the relevant ^*franking period is taken not to have been franked with an exempting credit.

Subdivision 208-F—Exempting accounts and franking accounts of exempting entities and former exempting entities
Guide to Subdivision 208-F

208-105 What this Subdivision is about

This Subdivision:

• creates an exempting account for each former exempting entity; and

• identifies when exempting credits and debits arise in those accounts and the amount of those credits and debits; and

• identifies when there is an exempting surplus or deficit in the account; and

• identifies when franking credits and debits arise in the franking account of an entity because it is an exempting entity, or former exempting entity.

Table of sections

Operative provisions

208-110 Exempting account

208-115 Exempting credits

208-120 Exempting debits

208-125 Exempting surplus and deficit

208-130 Franking credits arising because of status as exempting entity or former exempting entity

208-135 Relationships that will give rise to a franking credit under item 5 of the table in section 208-130

208-140 Membership of the same effectively wholly-owned group

208-145 Franking debits arising because of status as exempting entity or former exempting entity

208-150 Residency requirement

208-155 Eligible continuing substantial member

208-160 Distributions that are affected by a manipulation of the imputation system

208-165 Amount of the exempting credit or franking credit arising because of a distribution franked with an exempting credit

208-170 Where a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 affects part of the distribution

208-175 When does a distribution franked with an exempting credit flow indirectly to an entity?

208-180 What is an entity’s share of the exempting credit on a distribution?

208-185 Minister may convert exempting surplus to franking credit of former exempting entity previously owned by the Commonwealth

[This is the end of the Guide.]

Operative provisions

208-110 Exempting account

Each ^*former exempting entity has an exempting account.

208-115 Exempting credits

The following table sets out when a credit arises in the ^*exempting account of a ^*former exempting entity. A credit in the former exempting entity’s account is called an exempting credit.