Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (NO. 2) 2002 NO. 57, 2002 - SCHEDULE 1

Income Tax Assessment Act 1936

1 Section 160APA (paragraph (baa) of the definition of applicable general company tax rate)

Omit "34%", substitute "30%".

2 Section 160APA (paragraph (cb) of the definition of applicable general company tax rate)

Omit "34%", substitute "30%".

3 At the end of section 160AQG

Add:

(5)

If a company has a franking year that includes, but does not start on, 1 July 2001, subsections (1) to (3) apply to the company as if the following periods were separate franking years:

(a)

the period starting at the start of the company's franking year and ending on 30 June 2001;

(b)

the period starting on 1 July 2001 and ending at the end of the franking year.

4 Subparagraph 160AQH(1)(b)(iva)

Omit "34%", substitute "30%".

5 Subsection 160AQJC(4) (formula)

Repeal the formula, substitute:

6 Subsection 160ATA(3)

After "1 July 2000", insert "(and before 1 July 2001)".

7 Paragraph 160ATD(1)(a)

After "on or after 1 July 2000", insert "and before 1 July 2001".

8 Subsection 160ATD(1) (table heading)

After "on or after 1 July 2000", insert "and before 1 July 2001".

9 Paragraph 160ATDA(2)(b)

Repeal the paragraph.

10 At the end of Part IIIAA

Add:

Division 15—Transitional provisions for conversion to 30% rate on 1 July 2001
160AUA Conversion of account balances on 1 July 2001

(1)

On 1 July 2001, a company's franking accounts are dealt with as follows:

(a)

first:

(i)

the company's class C franking account balance (if any) at the start of that day is converted under section 160AUB to reflect the new company tax rate; and

(ii)

the company's venture capital sub-account balance (if any) at the start of that day is converted under section 160AUB to reflect the new company tax rate;

(b)

then, any other credits and debits that occur on that day are processed.

(2)

For the purposes of this Division, if 1 July 2001 is the first day of a franking year for the company, the balance in a franking account or sub-account of the company at the start of that day includes any credit arising for that account on that day under section 160APL (carry forward of surplus from previous franking year) or 160ASEE (carry forward of venture capital sub-account surplus from previous franking year).

(3)

Section 160AUC tells you how to deal with franking credits and debits that arise on or after 1 July 2001 but reflect tax paid at the old company tax rates.

160AUB Conversion of balance of class C franking account to reflect the new company tax rate

(1)

If a company has a class C franking surplus at the start of 1 July 2001:

(a)

a class C franking debit of the company arises equal to that surplus; and

(b)

a class C franking credit of the company arises equal to the amount of that debit multiplied by the conversion factor in subsection (5).

(2)

If a PDF has a venture capital sub-account surplus at the start of 1 July 2001:

(a)

a venture capital debit of the PDF arises equal to that surplus; and

(b)

a venture capital credit of the PDF arises equal to the amount of that debit multiplied by the conversion factor in subsection (5).

(3)

If a company has a class C franking deficit at the start of 1 July 2001:

(a)

a class C franking credit of the company arises equal to that deficit; and

(b)

a class C franking debit of the company arises equal to the amount of that credit multiplied by the conversion factor in subsection (5).

(4)

If a PDF has a venture capital sub-account deficit at the start of 1 July 2001:

(a)

a venture capital credit of the PDF arises equal to that deficit; and

(b)

a venture capital debit of the PDF arises equal to the amount of that credit multiplied by the conversion factor in subsection (5).

(5)

The conversion factor is:

160AUC Special treatment of some franking credits and debits arising on or after 1 July 2001

(1)

If:

(a)

any of the events specified in the event column of the following table occurs in relation to a company on or after 1 July 2001; and

(b)

the event:

(i)

is not a franking credit or debit arising under this Division; and

(ii)

is not a franking credit arising under section 160APL (carry forward of surplus from previous franking year) or 160ASEE (carry forward of venture capital sub-account surplus from previous franking year); and

(iii)

is not a franking debit arising under section 160APX (under-franking of a dividend), 160AQB (payment of a franked dividend), 160AQCB, 160AQCBA, 160AQCNA or 160AQCNB (dividend streaming or franking credit trading arrangements), 160AQCC (on-market share buy back arrangements) or 160AQCNC (private company distributions treated as dividends);

the adjustments specified in the adjustments column for that item are made to the company's franking accounts:

(2)

For the purposes of items 5, 6, 7 and 8 of the table in subsection (1), the amount of a credit or debit reflects an applicable general company tax rate of 34% if:

(a)

the applicable general company tax rate used to calculate the amount of the debit or credit is 34%; or

(b)

the debit arises under subsection 160AQC(3) or section 160ASEI and the amount specified in the application for the estimated debit concerned is based on a 34% general company tax rate; or

(c)

the credit or debit is equal to the amount of an earlier debit or credit and the earlier debit or credit reflected an applicable general company tax rate of 34%.

Note 1: Paragraph (a)—the applicable general company tax rate will always be involved in the calculation of a credit or debit if an "adjusted amount" is used in the calculation.

Note 2: Paragraph (c) covers provisions such as sections 160APV, 160APVB, 160AQCA and 160AQCCB.

(3)

For the purposes of items 9, 10, 11 and 12 of the table in subsection (1), the amount of a credit or debit reflects an applicable general company tax rate of 36% if:

(a)

the applicable general company tax rate used to calculate the amount of the debit or credit is 36%; or

(b)

the credit or debit is equal to the amount of an earlier debit or credit and the earlier debit or credit reflected an applicable general company tax rate of 36%.

Note 1: Paragraph (a)—the applicable general company tax rate will always be involved in the calculation of a credit or debit if an "adjusted amount" is used in the calculation.

Note 2: Paragraph (b) covers provisions such as sections 160APV, 160APVB, 160AQCA and 160AQCCB.

160AUD Special treatment of some franking credits and debits arising before 1 July 2001

(1)

If:

(a)

any of the events specified in the event column of the following table occurred in relation to a company before 1 July 2001; and

(b)

the event:

(i)

was not a franking credit arising under section 160APL (carry forward of surplus from previous franking year) or 160ASEE (carry forward of venture capital sub-account surplus from previous franking year); and

(ii)

was not a franking debit arising under section 160APX (under-franking of a dividend), 160AQB (payment of a franked dividend), 160AQCB, 160AQCBA, 160AQCNA or 160AQCNB (dividend streaming or franking credit trading arrangements), 160AQCC (on-market share buy back arrangements) or 160AQCNC (private company distributions treated as dividends);

the adjustments specified in the adjustment column for that item are taken to have been made to the company's franking accounts immediately after the event occurred:

(2)

The amount of a credit or debit reflects an applicable general company tax rate of 30% if:

(a)

the applicable general company tax rate used to calculate the amount of the credit or debit is 30%; or

(b)

the debit arises under subsection 160AQC(3) or section 160ASEI and the amount of the estimated debit concerned is based on a 30% general company tax rate; or

(c)

the credit or debit is equal to the amount of an earlier debit or credit and the earlier debit or credit reflected an applicable general company tax rate of 30%.

Note 1: Paragraph (a)—the applicable general company tax rate will always be involved in the calculation of a credit or debit if an "adjusted amount" is used in the calculation.

Note 2: Paragraph (c) covers provisions such as sections 160APV, 160APVB, 160AQCA and 160AQCCB.

160AUE Series of dividends crossing over 1 July 2001

(1)

This section deals with the situation in which:

(a)

a company pays a number of class C franked dividends under a resolution made before 1 July 2001; and

(b)

some of the dividends (the first series dividends ) are paid before 1 July 2001; and

(c)

some of the dividends (the second series dividends ) are paid on or after 1 July 2001.

(2)

For the purposes of this Part:

(a)

the first series dividends and the second series dividends are to be taken to have been made under separate resolutions; and

(b)

any declaration (the original declaration ) made under section 160AQF or 160ASEL in relation to the dividends is taken to have effect only in relation to the first series dividends; and

(c)

the consequences provided for in the following table occur if the company does not make a declaration under section 160AQF or 160ASEL in relation to the second series dividends before the reckoning day for the second series dividends:

Note 1: Paragraph (a) means that the 2 series of dividends will have separate reckoning days (see the definition of reckoning day in section 160APA). The reckoning day for the second series dividends will be the day on which the first of the second series dividends is paid. This in turn affects the calculation of the required franking amount for the second series dividends.

Note 2: Paragraph (b) means that the company may make a fresh declaration under section 160AQF in relation to the second series dividends. The company may wish to do this to ensure that the second series dividends are franked to the new required franking amount that will need to be calculated under Division 4. It will also mean that the company may make a fresh declaration under section 160ASEL.

160AUF Dividends paid under resolution made before 1 July 2001 but with a reckoning day after 1 July 2001

(1)

This section deals with the situation in which:

(a)

on or after 1 July 2001, a company pays a class C franked dividend or a number of class C franked dividends under a resolution made before 1 July 2001; and

(b)

section 160AUE does not apply to the dividend or dividends.

(2)

For the purposes of this Part:

(a)

despite subsection 160AQF(2), the company may:

(i)

vary any declaration it made under section 160AQF or 160ASEL in relation to the dividend or dividends; or

(ii)

revoke any declaration it made under section 160AQF or 160ASEL in relation to the dividend or dividends and make a fresh declaration under that section in relation to the dividend or dividends;

before the reckoning day for the dividend or dividends; and

(b)

a declaration varied, or a fresh declaration made, under this section cannot itself be varied or revoked.

160AUG Modifying the operation of subsection 160AQE(3)

When this section applies

(1)

This section deals with the situation in which:

(a)

subsection 160AQE(3) is applied to work out the provisional required franking amount for a dividend (the current dividend ) paid on or after 1 July 2001; and

(b)

the earlier franked dividend referred to in that subsection was paid before 1 July 2001.

Effect on required franking amount

(2)

The component EFA in the formula in subsection 160AQE(3) is worked out using the following formula:

where: