INCOME TAX ASSESSMENT ACT 1997 - SECT 802.60 No streaming of distributions
INCOME TAX ASSESSMENT ACT 1997 - SECT 802.60
No streaming of distributions(1) Subsection (2) has effect if:
(a) an * Australian corporate tax entity makes one or more * frankable distributions in a * franking period; and
(b) at least one of the * distributions has an * unfranked part; and
(c) the entity declares an amount of the unfranked part to be * conduit foreign income.
(2) If the entity does not, for that * franking period, declare the same proportion of * conduit foreign income for all * membership interests and * non - share equity interests then, instead of the amount that it declared to be conduit foreign income on those * distributions, it is taken to have declared under section 802 - 45 the greater amount that it would have declared had it declared that same proportion on all those distributions.
Note: Breaching subsection (2) may make the entity subject to a penalty under section 288 - 80 in Schedule 1 to the Taxation Administration Act 1953 (about over declaring conduit foreign income).
Example: There are 10,000 membership interests in AusCo Limited, 7,500 held by foreign residents and 2,500 held by Australian residents. It has $1,800 of conduit foreign income.
AusCo makes an unfranked distribution of 50 cents per membership interest to all of its members. It declares $1,500 of the distribution to be conduit foreign income for its 7,500 foreign membership interests (20 cents per membership interest or 40% of each distribution) and none for its Australian membership interests.
AusCo is taken to have declared the same proportion (40% of each distribution) of conduit foreign income for its Australian membership interests (which amounts to $500 of conduit foreign income). It is therefore taken to have declared $2,000 of conduit foreign income. This is an over - declaration of $200 and a penalty under section 288 - 80 in Schedule 1 to the Taxation Administration Act 1953 will apply.
(3) For the purposes of subsection (2), ignore * membership interests and * non - share equity interests that do not carry a right to receive * distributions (other than distributions on winding up).
(4) Despite subsection (2), an entity that receives a * frankable distribution that has an * unfranked part is entitled to rely on the * distribution statement made by the entity that made the distribution.
815 - A Treaty - equivalent cross - border transfer pricing rules
815 - B Arm's length principle for cross - border conditions between entities
815 - C Arm's length principle for permanent establishments
815 - D Special rules for trusts and partnerships
815 - E Reporting obligations for country by country reporting entities