Commonwealth Numbered Acts

TAX LAWS AMENDMENT (2007 MEASURES NO. 3) ACT 2007 (NO. 79, 2007) - SCHEDULE 6

Income Tax Assessment Act 1936

1  Sections 46G to 46M

Repeal the sections.

2  After paragraph 177EA(17)(g)

Insert:

                    (ga)  whether a distribution that is made or that flows indirectly under the scheme to the relevant taxpayer is sourced, directly or indirectly, from unrealised or untaxed profits;

Income Tax Assessment Act 1997

3  Subsection 197‑50(1) (note)

Repeal the note, substitute:

Note:          If a company's share capital account is tainted, then a distribution from the account is taxed as a dividend in the hands of the shareholder. This is because a tainted share capital account does not count as a share capital account for the purposes of paragraph (d) of the definition of dividend in subsection 6(1) of the Income Tax Assessment Act 1936 (see subsection 975‑300(3) of this Act). However, although the distribution is taxed as a dividend, the company cannot pass on to the shareholder the benefit of the tax it has paid, because a distribution from a share capital account (whether or not tainted) is unfrankable (see paragraphs 202‑45(e) and 975‑300(3)(ba) of this Act).

4  Paragraph 202‑45(e)

Repeal the paragraph, substitute:

                     (e)  a distribution that is sourced, directly or indirectly, from a company's * share capital account;

5  Subsection 375‑872(4)

Repeal the subsection, substitute:

Paragraph 202‑45(e) does not apply

             (4)  Paragraph 202‑45(e) does not apply to a payment that is taken to be a dividend under this section.

Note:          Paragraph 202‑45(e) provides that a distribution that is sourced, directly or indirectly, from a company's share capital account is unfrankable.

6  After paragraph 975‑300(3)(b)

Insert:

                    (ba)  paragraph 202‑45(e); and

7  Paragraph 975‑300(3)(e)

Repeal the paragraph.

8  Application

The amendments made by this Schedule apply in relation to distributions made on or after 1 July 2004.