Commonwealth Consolidated Acts Commonwealth Consolidated ActsThis Subdivision does not apply to a * capital gain to which Subdivision 152-B (15-year exemption) applies.
Note: Under that Subdivision, such a gain is entirely disregarded, so there is no need for any further concession to apply.
Contents
Chapter 3--Specialist liability rules i
Part 3-5--Corporate taxpayers and corporate distributions 1
Division 164--Non-share capital accounts for companies 1
Guide to Division 164 1
164-1..... What this Division is about ................................................................. 1
164-5..... Object .................................................................................................. 1
164-10... Non-share capital account ................................................................... 2
164-15... Credits to non-share capital account .................................................... 3
164-20... Debits to non-share capital account ..................................................... 5
Division 165--Income tax consequences of changing ownership or control of a company 7
Guide to Division 165 7
165-1..... What this Division is about ................................................................. 7
Subdivision 165-A--Deducting tax losses of earlier income years 8
Guide to Subdivision 165-A 8
165-5..... What this Subdivision is about ............................................................ 8
165-10... To deduct a tax loss ............................................................................. 9
165-12... Company must maintain the same owners .......................................... 9
165-13... Alternatively, the company must satisfy the same business test ........ 11
165-15... The same people must control the voting power, or the company must satisfy the same business test 12
165-20... When company can deduct part of a tax loss .................................... 13
Subdivision 165-B--Working out the taxable income and tax loss for the income year of the change 13
Guide to Subdivision 165-B 13
165-23... What this Subdivision is about .......................................................... 13
165-25... Summary of this Subdivision ............................................................ 14
165-30... Flow chart showing the application of this Subdivision .................... 16
When a company must work out its taxable income and tax loss under this Subdivision 17
165-35... On a change of ownership, unless the company satisfies the same business test 17
165-37... Who has more than a 50% stake in the company during a period .... 17
165-40... On a change of control of the voting power in the company, unless the company satisfies the same business test 19
Working out the company's taxable income 20
165-45... First, divide the income year into periods .......................................... 20
165-50... Next, calculate the notional loss or notional taxable income for each period 20
165-55... How to attribute deductions to periods .............................................. 21
165-60... How to attribute assessable income to periods .................................. 22
165-65... How to calculate the company's taxable income for the income year 24
Working out the company's tax loss 25
165-70... How to calculate the company's tax loss for the income year ........... 25
Special rules that apply if the company is in partnership 26
165-75... How to calculate the company's notional loss or notional taxable income for a period when the company was a partner .......................................................................................................... 26
165-80... How to calculate the company's share of a partnership's notional loss or notional net income for a period if both entities have the same income year ................................................................ 27
165-85... How to calculate the company's share of a partnership's notional loss or notional net income for a period if the entities have different income years ............................................................... 27
165-90... Company's full year deductions include a share of partnership's full year deductions 28
Subdivision 165-CA--Applying net capital losses of earlier income years 29
Guide to Subdivision 165-CA 29
165-93... What this Subdivision is about .......................................................... 29
165-96... When a company cannot apply a net capital loss ............................... 29
Subdivision 165-CB--Working out the net capital gain and the net capital loss for the income year of the change 30
Guide to Subdivision 165-CB 30
165-99... What this Subdivision is about .......................................................... 30
When a company must work out its net capital gain and net capital loss under this Subdivision 31
165-102. On a change of ownership, or of control of voting power, unless the company satisfies the same business test 31
Working out the company's net capital gain and net capital loss 31
165-105. First, divide the income year into periods .......................................... 31
165-108. Next, calculate the notional net capital gain or notional net capital loss for each period 31
165-111. How to work out the company's net capital gain .............................. 32
165-114. How to work out the company's net capital loss ............................... 33
Subdivision 165-CC--Change of ownership or control of company that has an unrealised net loss 34
Guide to Subdivision 165-CC 34
165-115. What this Subdivision is about .......................................................... 34
165-115AASpecial rules to save compliance costs .......................................... 34
165-115AApplication of Subdivision .............................................................. 35
165-115BWhat happens when the company makes a capital loss or
becomes
entitled to a deduction in respect of a CGT asset after a changeover
time
38
165-115BAWhat happens when a CGT event happens after a
changeover time to a CGT asset of the company that is trading stock
40
165-115BBOrder of application of assets: residual unrealised net loss ............ 41
165-115CChangeover time--change in ownership of company ...................... 42
165-115DChangeover time--change in control of company ........................... 44
165-115EWhat is an unrealised net loss ........................................................... 44
165-115FNotional gains and losses ................................................................. 47
Subdivision 165-CD--Reductions after alterations in ownership or control of loss company 49
Guide to Subdivision 165-CD 49
165-115GAWhat this Subdivision is about ..................................................... 49
165-115GBWhen adjustments must be made .................................................. 49
165-115GCHow adjustments are calculated .................................................... 50
165-115HHow this Subdivision applies .......................................................... 51
165-115JObject of Subdivision ....................................................................... 54
165-115KApplication and interpretation .......................................................... 55
165-115LAlteration time--alteration in ownership of company ...................... 56
165-115MAlteration time--alteration in control of company ........................... 57
165-115NAlteration time--declaration by liquidator or administrator ............. 58
165-115PNotional alteration time--disposal of interests in company
within 12 months before alteration time
............................................
58
165-115QNotional alteration time--disposal of interests in company
earlier than 12 months before alteration time
.....................................
60
165-115RWhen company is a loss company at first or only alteration
time in income year
...........................................................................
61
165-115SWhen company is a loss company at second or later alteration
time in income year
...........................................................................
63
165-115TReduction of certain amounts included in company's overall
loss at alteration time
.........................................................................
65
165-115UAdjusted unrealised loss .................................................................. 65
165-115VNotional losses ................................................................................ 68
165-115WCalculation of trading stock decrease .............................................. 69
165-115XRelevant equity interest .................................................................... 70
165-115YRelevant debt interest ....................................................................... 73
165-115ZWhat constitutes a controlling stake in a company ............................ 76
165-115ZAReductions and other consequences if entity has relevant
equity interest or relevant debt interest in loss company immediately before
alteration time
77
165-115ZBAdjustment amounts for the purposes of
section 165-115ZA
...........................................................................
80
165-115ZCNotices to be given ........................................................................ 83
165-115ZDAdjustment (or further adjustment) for interest realised at a
loss after global method has been used
.............................................
87
Subdivision 165-C--Deducting bad debts 91
Guide to Subdivision 165-C 91
165-117. What this Subdivision is about .......................................................... 91
165-119. Application of Subdivision ............................................................... 92
165-120. To deduct a bad debt ......................................................................... 92
165-123. Company must maintain the same owners ........................................ 93
165-126. Alternatively, the company must satisfy the same business test ........ 95
165-129. Same people must control the voting power, or the company must satisfy the same business test 96
165-132. When tax losses resulting from bad debts cannot be deducted .......... 97
Subdivision 165-D--Tests for finding out whether the company has maintained the same owners 98
The primary and alternative tests 99
165-150. Who has more than 50% of the voting power in the company .......... 99
165-155. Who has rights to more than 50% of the company's dividends ........ 99
165-160. Who has rights to more than 50% of the company's capital distributions 100
165-165. Rules about tests for a condition or occurrence of a circumstance ... 100
165-175. Tests can be satisfied by a single person ......................................... 103
Rules affecting the operation of the tests 103
165-180. Arrangements affecting beneficial ownership of shares .................. 103
165-185. Shares treated as not having carried rights ...................................... 103
165-190. Shares treated as always having carried rights ................................ 104
165-200. Rules do not affect totals of shares, units in unit trusts or rights carried by shares and units 105
165-202. Shares held by government entities and charities etc. ...................... 105
165-203. Companies where no shares have been issued ................................ 106
165-205. Death of beneficial owner ............................................................... 106
165-207. Trustees of family trusts .................................................................. 106
165-208. Companies in liquidation etc. .......................................................... 107
165-209. Dual listed companies ..................................................................... 109
Subdivision 165-E--The same business test 109
165-210. The test ............................................................................................ 109
165-212DRestructure of MDOs etc. .............................................................. 110
165-212EEntry history rule does not apply for the purposes of the
same business test
...........................................................................
110
Subdivision 165-F--Special provisions relating to ownership by non-fixed trusts 110
165-215. Special alternative to change of ownership test for Subdivision 165-A 111
165-220. Special alternative to change of ownership test for Subdivision 165-B 112
165-225. Special way of dividing the income year under Subdivision 165-B 114
165-230. Special alternative to change of ownership test for Subdivision 165-C 115
165-235. Information about non-fixed trusts with interests in company ........ 117
165-240. Notices where requirements of section 165- 235 are met ................. 118
165-245. When an entity has a fixed entitlement to income or capital of a company 119
Subdivision 165-G--Other special provisions 120
165-250. Control of companies in liquidation etc. .......................................... 120
165-255. Incomplete periods .......................................................................... 121
Division 166--Income tax consequences of changing ownership or control of a widely held or eligible Division 166 company 122
Guide to Division 166 122
166-1..... What this Division is about ............................................................. 122
Subdivision 166-AA--The object of this Division 123
166-3..... The object of this Division .............................................................. 123
Subdivision 166-A--Deducting tax losses of earlier income years 123
166-5..... How Subdivision 165-A applies to a widely held or eligible Division 166 company 124
166-15... Companies can choose that this Subdivision is not to apply to them 125
Subdivision 166-B--Working out the taxable income, tax loss, net capital gain and net capital loss for the income year of the change 126
166-20... How Subdivisions 165-B and 165-CB apply to a widely held or eligible Division 166 company 126
166-25... How to work out the taxable income, tax loss, net capital gain and net capital loss 127
166-35... Companies can choose that this Subdivision is not to apply to them 128
Subdivision 166-C--Deducting bad debts 128
166-40... How Subdivision 165-C applies to a widely held or eligible Division 166 company 129
166-50... Companies can choose that this Subdivision is not to apply to them 130
Subdivision 166-CA--Changeover times and alteration times 131
166-80... How Subdivision 165-CC or 165-CD applies to a widely held or eligible Division 166 company 131
166-90... Companies can choose that this Subdivision is not to apply to them 132
Subdivision 166-D--Tests for finding out whether the widely held or eligible Division 166 company has maintained the same owners 133
Guide to Subdivision 166-D 133
166-135. What this Subdivision is about ........................................................ 133
The ownership tests: substantial continuity of ownership 133
166-145. The ownership tests: substantial continuity of ownership ............... 133
166-165. Relationship with rules in Division 165 .......................................... 135
Corporate change in a company 135
166-175. Corporate change in a company ...................................................... 135
Subdivision 166-E--Concessional tracing rules 137
Guide to Subdivision 166-E 137
166-215. What this Subdivision is about ........................................................ 137
Application of this Subdivision 138
166-220. Application of this Subdivision ....................................................... 138
Stakes of less than 10% in the tested company 139
166-225. Direct stakes of less than 10% in the tested company ..................... 139
166-230. Indirect stakes of less than 10% in the tested company ................... 140
166-235. Voting, dividend and capital stakes ................................................. 142
Stakes held directly and/or indirectly by widely held companies 143
166-240. Stakes held directly and/or indirectly by widely held companies ..... 143
166-245. Stakes held by other entities ............................................................ 145
When identity of foreign stakeholders is not known 148
166-255. Bearer shares in foreign listed companies ....................................... 148
166-260. Depository entities holding stakes in foreign listed companies ....... 150
Other rules relating to voting power and rights 152
166-265. Persons who actually control voting power or have rights are taken not to control power or have rights 152
166-270. Single notional entity stakeholders taken to have minimum voting control, dividend rights and capital rights 152
166-272. Same shares or interests to be held .................................................. 153
When the rules in this Subdivision do not apply 157
166-275. Rules in this Subdivision intended to be concessional .................... 157
166-280. Controlled test companies ............................................................... 157
Division 170--Treatment of certain company groups for income tax purposes 159
Subdivision 170-A--Transfer of tax losses within certain wholly-owned groups of companies 159
Guide to Subdivision 170-A 159
170-1..... What this Subdivision is about ........................................................ 159
170-5..... Basic principles for transferring tax losses ...................................... 160
Effect of transferring a tax loss 161
170-10... When a company can transfer a tax loss .......................................... 161
170-15... Income company is taken to have incurred transferred loss ............ 161
170-20... Who can deduct transferred loss ..................................................... 162
170-25... Tax treatment of consideration for transferred tax loss .................... 162
170-30... Companies must be in existence and members of the same wholly-owned group etc. 163
170-32... Tax loss incurred by the loss company because of a transfer under Subdivision 707-A 164
170-33... Alternative test of relations between the loss company and other companies 165
170-35... The loss company ........................................................................... 167
170-40... The income company ...................................................................... 168
170-42... If the income company has become the head company of a consolidated group or MEC group 168
170-45... Maximum amount that can be transferred ....................................... 170
170-50... Transfer by written agreement ......................................................... 172
170-55... Losses must be transferred in order they are incurred ..................... 173
170-60... Income company cannot transfer transferred tax loss ...................... 173
Effect of agreement to transfer more than can be transferred 174
170-65... Agreement transfers as much as can be transferred ......................... 174
170-70... Amendment of assessments ............................................................ 174
Australian permanent establishments of foreign financial entities 174
170-75... Treatment like Australian branches of foreign banks ...................... 174
Subdivision 170-B--Transfer of net capital losses within certain wholly-owned groups of companies 175
Guide to Subdivision 170-B 175
170-101. What this Subdivision is about ........................................................ 175
170-105. Basic principles for transferring a net capital loss ........................... 176
Effect of transferring a net capital loss 177
170-110. When a company can transfer a net capital loss ............................... 177
170-115. Who can apply transferred loss ....................................................... 177
170-120. Gain company is taken to have made transferred loss ..................... 178
170-125. Tax treatment of consideration for transferred tax loss .................... 178
170-130. Companies must be in existence and members of the same wholly-owned group etc. 179
170-132. Net capital loss made by the loss company because of a transfer under Subdivision 707-A 180
170-133. Alternative test of relations between the loss company and other companies 181
170-135. The loss company ........................................................................... 183
170-140. The gain company ........................................................................... 184
170-142. If the gain company has become the head company of a consolidated group or MEC group 184
170-145. Maximum amount that can be transferred ....................................... 186
170-150. Transfer by written agreement ......................................................... 188
170-155. Losses must be transferred in order they are made .......................... 189
170-160. Gain company cannot transfer transferred net capital loss ............... 189
Effect of agreement to transfer more than can be transferred 190
170-165. Agreement transfers as much as can be transferred ......................... 190
170-170. Amendment of assessments ............................................................ 190
Australian permanent establishments of foreign financial entities 190
170-174. Treatment like Australian branches of foreign banks ...................... 190
Subdivision 170-C--Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly-owned groups of companies 191
Guide to Subdivision 170-C 191
170-201. What this Subdivision is about ........................................................ 191
170-205. Object of Subdivision ..................................................................... 192
170-210. Transfer of tax loss: direct and indirect interests in the loss company 192
170-215. Transfer of tax loss: direct and indirect interests in the income company 195
170-220. Transfer of net capital loss: direct and indirect interests in the loss company 198
170-225. Transfer of net capital loss: direct and indirect interests in the gain company 200
Subdivision 170-D--Transactions by a company that is a member of a linked group 203
Guide to Subdivision 170-D 203
170-250. What this Subdivision is about ........................................................ 203
170-255. Application of Subdivision ............................................................. 204
170-260. Linked group ................................................................................... 205
170-265. Connected entity .............................................................................. 206
170-270. Immediate consequences for originating company .......................... 208
170-275. Subsequent consequences for originating company ........................ 208
170-280. What happens if certain events happen in respect of the asset ......... 209
Division 175--Use of a company's tax losses or deductions to avoid income tax 212
Guide to Division 175 212
175-1..... What this Division is about ............................................................. 212
Subdivision 175-A--Tax benefits from unused tax losses 212
175-5..... When Commissioner can disallow deduction for tax loss ............... 213
175-10... First case: income or capital gain injected into company because of available tax loss 213
175-15... Second case: someone else obtains a tax benefit because of tax loss available to company 214
Subdivision 175-B--Tax benefits from unused deductions 215
175-20... Income or capital gain injected into company because of available deductions 215
175-25... Deduction injected into company because of available income or capital gain 216
175-30... Someone else obtains a tax benefit because of a deduction, income or capital gain available to company 216
175-35... Tax loss resulting from disallowed deductions ............................... 218
Subdivision 175-CA--Tax benefits from unused net capital losses of earlier income years 218
175-40... When Commissioner can disallow net capital loss of earlier income year 218
175-45... First case: capital gain injected into company because of available net capital loss 219
175-50... Second case: someone else obtains a tax benefit because of net capital loss available to company 220
Subdivision 175-CB--Tax benefits from unused capital losses of the current year 221
175-55... When Commissioner can disallow capital loss of current year ........ 221
175-60... Capital gain injected into company because of available capital loss 221
175-65... Capital loss injected into company because of available capital gain 222
175-70... Someone else obtains a tax benefit because of capital loss or gain available to company 222
175-75... Net capital loss resulting from disallowed capital losses ................. 223
Subdivision 175-C--Tax benefits from unused bad debt deductions 224
175-80... When Commissioner can disallow deduction for bad debt .............. 224
175-85... First case: income or capital gain injected into company because of available bad debt 224
175-90... Second case: someone else obtains a tax benefit because of bad debt deduction available to company 225
Subdivision 175-D--Common rules 226
175-95... When a person has a shareholding interest in the company ............. 226
175-100. Commissioner may disallow excluded losses etc. of insolvent companies 226
Division 180--Information about family trusts with interests in companies 228
Guide to Division 180 228
180-1..... What this Division is about ............................................................. 228
Subdivision 180-A--Information relevant to Division 165 228
180-5..... Information about family trusts with interests in companies ........... 228
180-10... Notice where requirements of section 180-5 are met ....................... 230
Subdivision 180-B--Information relevant to Division 175 232
180-15... Information about family trusts with interests in companies ........... 232
180-20... Notice where requirements of section 180-15 are met ..................... 234
Division 195--Special types of company 236
Subdivision 195-A--Pooled development funds (PDFs) 236
Guide to Subdivision 195-A 236
195-1..... What this Subdivision is about ........................................................ 236
Working out a PDF's taxable income and tax loss 237
195-5..... Deductibility of PDF tax losses ...................................................... 237
195-10... PDF cannot transfer tax loss ........................................................... 237
195-15... Tax loss for year in which company becomes a PDF ..................... 237
Working out a PDF's net capital gain and net capital loss 238
195-25... Applying a PDF's net capital losses ............................................... 238
195-30... PDF cannot transfer net capital loss ................................................ 238
195-35... Net capital loss for year in which company becomes a PDF ........... 238
Subdivision 195-B--Limited partnerships 239
Guide to Subdivision 195-B 239
195-60... What this Subdivision is about ........................................................ 239
195-65... Tax losses cannot be transferred to a VCLP, an ESVCLP, an AFOF or a VCMP 240
195-70... Previous tax losses can be deducted after ceasing to be a VCLP, an ESVCLP, an AFOF or a VCMP 240
195-75... Determinations to take account of income years of less than 12 months 241
Division 197--Tainted share capital accounts 242
Guide to Division 197 242
197-1..... What this Division is about ............................................................. 242
Subdivision 197-A--What transfers into a company's share capital account does this Division apply to? 242
197-5..... Division generally applies to an amount transferred to share capital account from another account 243
197-10... Exclusion for amounts that could be identified as share capital ....... 243
197-15... Exclusion for amounts transferred under debt/equity swaps ........... 244
197-20... Exclusion for amounts transferred leading to there being no shares with a par value--non-Corporations Act companies ........................................................................................................ 244
197-25... Exclusion for transfers from option premium reserves ................... 245
197-30... Exclusion for transfers made in connection with demutualisations of non-insurance etc. companies 245
197-35... Exclusion for transfers made in connection with demutualisations of insurance etc. companies 246
197-37... Exclusion for transfers made in connection with demutualisations of private health insurers 247
197-38... Exclusion for transfers connected with demutualisations of friendly society health or life insurers 248
197-40... Exclusion for post-demutualisation transfers relating to life insurance companies 249
Subdivision 197-B--Consequence of transfer: franking debit arises 251
197-45... A franking debit arises in relation to the transfer ............................. 251
Subdivision 197-C--Consequence of transfer: tainting of share capital account 252
197-50... The share capital account becomes tainted (if it is not already tainted) 252
197-55... Choosing to untaint a tainted share capital account .......................... 253
197-60... Choosing to untaint--liability to untainting tax ............................... 253
197-65... Choosing to untaint--further franking debits may arise .................. 255
197-70... Due date for payment of untainting tax ........................................... 256
197-75... General interest charge for late payment of untainting tax ............... 256
197-80... Notice of liability to pay untainting tax ............................................ 256
197-85... Evidentiary effect of notice of liability to pay untainting tax ............ 257
Part 3-6--The imputation system 259
Division 200--Guide to Part 3-6 259
Guide to Division 200 259
200-1..... What this Division is about ............................................................. 259
200-5..... The imputation system .................................................................... 259
200-10... Franking a distribution .................................................................... 260
200-15... The franking account ....................................................................... 260
200-20... How a distribution is franked .......................................................... 260
200-25... A corporate tax entity must not give its members credit for more tax than the entity has paid 260
200-30... Benchmark rule ............................................................................... 261
200-35... Effect of receiving a franked distribution ........................................ 261
200-40... An Australian corporate tax entity can pass the benefit of having received a franked distribution on to its members ........................................................................................................ 261
200-45... Special rules for franking by some entities ...................................... 262
Division 201--Objects and application of Part 3-6 263
201-1..... Objects ............................................................................................ 263
201-5..... Application of this Part ................................................................... 263
Division 202 -- Franking a distribution 264
Subdivision 202-A--Franking a distribution 264
Guide to Subdivision 202-A 264
202-1..... What this Subdivision is about ........................................................ 264
202-5..... Franking a distribution .................................................................... 264
Subdivision 202-B--Who can frank a distribution? 265
Guide to Subdivision 202-B 265
202-10... What this Subdivision is about ........................................................ 265
202-15... Franking entities .............................................................................. 265
202-20... Residency requirement when making a distribution ........................ 266
Subdivision 202-C--Which distributions can be franked? 266
Guide to Subdivision 202-C 266
202-25... What this Subdivision is about ........................................................ 266
202-30... Frankable distributions .................................................................... 267
202-35... Object .............................................................................................. 267
202-40... Frankable distributions .................................................................... 267
202-45... Unfrankable distributions ................................................................ 267
202-47... Distributions of certain ADI profits following restructure .............. 268
Subdivision 202-D--Amount of the franking credit on a distribution 269
Guide to Subdivision 202-D 269
202-50... What this Subdivision is about ........................................................ 269
202-55... What is the maximum franking credit for a frankable distribution? . 270
202-60... Amount of the franking credit on a distribution .............................. 270
202-65... Where the franking credit stated in the distribution statement exceeds the maximum franking credit for the distribution ........................................................................................................ 270
Subdivision 202-E--Distribution statements 271
Guide to Subdivision 202-E 271
202-70... What this Subdivision is about ........................................................ 271
202-75... Obligation to give a distribution statement ...................................... 271
202-80... Distribution statement ..................................................................... 272
202-85... Changing the franking credit on a distribution by amending the distribution statement 273
Division 203--Benchmark rule 275
Guide to Division 203 275
203-1..... What this Division is about ............................................................. 275
203-5..... Benchmark rule ............................................................................... 275
203-10... Benchmark franking percentage ...................................................... 276
203-15... Object .............................................................................................. 276
203-20... Application of the benchmark rule .................................................. 276
203-25... Benchmark rule ............................................................................... 277
203-30... Setting a benchmark franking percentage ........................................ 278
203-35... Franking percentage ........................................................................ 278
203-40... Franking periods--where the entity is not a private company ......... 278
203-45... Franking period--private companies .............................................. 279
203-50... Consequences of breaching the benchmark rule .............................. 279
203-55... Commissioner's powers to permit a departure from the benchmark rule 282
Division 204--Anti-streaming rules 284
Subdivision 204-A--Objects and application 284
204-1..... Objects ............................................................................................ 284
204-5..... Application ...................................................................................... 284
Subdivision 204-B--Linked distributions 285
Guide to Subdivision 204-B 285
204-10... What this Subdivision is about ........................................................ 285
204-15... Linked distributions ........................................................................ 285
Subdivision 204-C--Substituting tax-exempt bonus share for franked distributions 287
Guide to Subdivision 204-C 287
204-20... What this Subdivision is about ........................................................ 287
204-25... Substituting tax-exempt bonus shares for franked distributions ...... 287
Subdivision 204-D--Streaming distributions 289
Guide to Subdivision 204-D 289
204-26... What this Subdivision is about ........................................................ 289
204-30... Streaming distributions ................................................................... 289
204-35... When does a franking debit arise if the Commissioner makes a determination under paragraph 204-30(3)(a) 293
204-40... Amount of the franking debit .......................................................... 293
204-41... Amount of the exempting debit ....................................................... 294
204-45... Effect of a determination about distributions to favoured members . 295
204-50... Assessment and notice of determination ......................................... 295
204-55... Right to review where a determination made ................................... 296
Subdivision 204-E--Disclosure requirements 296
Guide to Subdivision 204-E 296
204-65... What this Subdivision is about ........................................................ 296
204-70... Application of this Subdivision ....................................................... 297
204-75... Notice to the Commissioner ............................................................ 297
204-80... Commissioner may require information where the Commissioner suspects streaming 298
Division 205--Franking accounts, franking deficit tax liabilities and the related tax offset 299
Guide to Division 205 299
205-1..... What this Division is about ............................................................. 299
205-5..... Franking accounts, franking deficit tax liabilities and the related tax offset 300
205-10... Each entity that is or has been a corporate tax entity has a franking account 300
205-15... Franking credits .............................................................................. 301
205-20... Paying a PAYG instalment or income tax ....................................... 304
205-25... Residency requirement for an event giving rise to a franking credit or franking debit 305
205-30... Franking debits ............................................................................... 306
205-35... Refund of income tax ...................................................................... 309
205-40... Franking surplus and deficit ............................................................ 310
205-45... Franking deficit tax ......................................................................... 310
205-50... Deferring franking deficit ................................................................ 311
205-70... Tax offset arising from franking deficit tax liabilities ...................... 312
Division 207--Effect of receiving a franked distribution 316
Guide to Division 207 316
207-5..... Overview ........................................................................................ 316
Subdivision 207-A--Effect of receiving a franked distribution generally 317
Guide to Subdivision 207-A 317
207-10... What this Subdivision is about ........................................................ 317
207-15... Applying the general rule ................................................................ 318
207-20... General rule--gross-up and tax offset ............................................ 319
Subdivision 207-B--Franked distribution received through certain partnerships and trustees 319
Guide to Subdivision 207-B 319
207-25... What this Subdivision is about ........................................................ 319
Gross-up and tax offset 320
207-30... Applying this Subdivision .............................................................. 320
207-35... Gross-up--distribution made to, or flows indirectly through, a partnership or trustee 321
207-37... Attributable franked distribution--trusts ......................................... 323
207-45... Tax offset--distribution flows indirectly to an entity ...................... 324
207-50... When a franked distribution flows indirectly to or through an entity 325
207-55... Share of a franked distribution ........................................................ 327
207-57... Share of the franking credit on a franked distribution ..................... 331
207-58... Specifically entitled to an amount of a franked distribution .............. 331
207-59... Franked distributions within class treated as single franked distribution 332
Subdivision 207-C--Residency requirements for the general rule 333
Guide to Subdivision 207-C 333
207-60... What this Subdivision is about ........................................................ 333
207-65... Satisfying the residency requirement ............................................... 333
207-70... Gross-up and tax offset under section 207-20 ................................ 334
207-75... Residency requirement .................................................................... 334
Subdivision 207-D--No gross-up or tax offset where distribution would not be taxed 335
Guide to Subdivision 207-D 335
207-80... What this Subdivision is about ........................................................ 335
207-85... Applying this Subdivision .............................................................. 336
207-90... Distribution that is made to an entity ............................................... 336
207-95... Distribution that flows indirectly to an entity .................................. 337
Subdivision 207-E--Exceptions to the rules in Subdivision 207-D 339
Guide to Subdivision 207-E 339
207-105. What this Subdivision is about ........................................................ 339
207-110. Effect of non-assessable income on gross up and tax offset ........... 340
207-115. Which exempt institutions are eligible for a refund? ........................ 341
207-117. Residency requirement .................................................................... 342
207-119. Entity not treated as exempt institution eligible for refund in certain circumstances 343
207-120. Entity may be ineligible because of a distribution event .................. 343
207-122. Entity may be ineligible if distribution is in the form of property other than money 345
207-124. Entity may be ineligible if other money or property also acquired ... 346
207-126. Entity may be ineligible if distributions do not match trust share amounts 346
207-128. Reinvestment choice ........................................................................ 347
207-130. Controller's liability ........................................................................ 349
207-132. Treatment of benefits provided by an entity to a controller .............. 352
207-134. Entity's present entitlement disregarded in certain circumstances .... 353
207-136. Review of certain decisions ............................................................. 353
Subdivision 207-F--No gross-up or tax offset where the imputation system has been manipulated 354
Guide to Subdivision 207-F 354
207-140. What this Subdivision is about ........................................................ 354
207-145. Distribution that is made to an entity ............................................... 354
207-150. Distribution that flows indirectly to an entity .................................. 356
207-155. When is a distribution made as part of a dividend stripping operation? 359
207-160. Distribution that is treated as an interest payment ............................ 360
Division 208--Exempting entities and former exempting entities 361
Guide to Division 208 361
208-5..... What is an exempting entity? ........................................................... 361
208-10... Former exempting entities ............................................................... 362
208-15... Distributions by exempting entities and former exempting entities . 362
Subdivision 208-A--What are exempting entities and former exempting entities? 362
208-20... Exempting entities ........................................................................... 363
208-25... Effective ownership of entity by prescribed persons ....................... 363
208-30... Accountable membership interests .................................................. 364
208-35... Accountable partial interests ............................................................ 367
208-40... Prescribed persons .......................................................................... 368
208-45... Persons who are taken to be prescribed persons ............................. 369
208-50... Former exempting companies ......................................................... 371
Subdivision 208-B--Franking with an exempting credit 372
Guide to Subdivision 208-B 372
208-55... What this Subdivision is about ........................................................ 372
208-60... Franking with an exempting credit .................................................. 372
Subdivision 208-C--Amount of the exempting credit on a distribution 373
Guide to Subdivision 208-C 373
208-65... What this Subdivision is about ........................................................ 373
208-70... Amount of the exempting credit on a distribution ........................... 373
Subdivision 208-D--Distribution statements 374
Guide to Subdivision 208-D 374
208-75... Guide to Subdivision 208-D ........................................................... 374
208-80... Additional information to be included by a former exempting entity or exempting entity 374
Subdivision 208-E--Distributions to be franked with exempting credits to the same extent 375
Guide to Subdivision 208-E 375
208-85... What this Subdivision is about ........................................................ 375
208-90... All frankable distributions made within a franking period must be franked to the same extent with an exempting credit ........................................................................................................ 375
208-95... Exempting percentage ..................................................................... 376
208-100. Consequences of breaching the rule in section 208-90 .................... 376
Subdivision 208-F--Exempting accounts and franking accounts of exempting entities and former exempting entities 376
Guide to Subdivision 208-F 376
208-105. What this Subdivision is about ........................................................ 376
208-110. Exempting account .......................................................................... 377
208-115. Exempting credits ............................................................................ 378
208-120. Exempting debits ............................................................................. 382
208-125. Exempting surplus and deficit ......................................................... 384
208-130. Franking credits arising because of status as exempting entity or former exempting entity 385
208-135. Relationships that will give rise to a franking credit under item 5 of the table in section 208-130 392
208-140. Membership of the same effectively wholly-owned group ............. 393
208-145. Franking debits arising because of status as exempting entity or former exempting entity 394
208-150. Residency requirement .................................................................... 396
208-155. Eligible continuing substantial member ........................................... 396
208-160. Distributions that are affected by a manipulation of the imputation system 398
208-165. Amount of the exempting credit or franking credit arising because of a distribution franked with an exempting credit ........................................................................................................ 399
208-170. Where a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 affects part of the distribution ...................................................................................... 399
208-175. When does a distribution franked with an exempting credit flow indirectly to an entity? 400
208-180. What is an entity's share of the exempting credit on a distribution? 401
208-185. Minister may convert exempting surplus to franking credit of former exempting entity previously owned by the Commonwealth ............................................................................... 401
Subdivision 208-G--Tax effects of distributions by exempting entities 402
Guide to Subdivision 208-G 402
208-190. What this Subdivision is about ........................................................ 402
208-195. Division 207 does not generally apply ............................................ 403
208-200. Distributions to exempting entities .................................................. 403
208-205. Distributions to employees acquiring shares under eligible employee share schemes 403
208-215. Eligible employee share schemes .................................................... 404
Subdivision 208-H--Tax effect of a distribution franked with an exempting credit 405
Guide to Subdivision 208-H 405
208-220. What this Subdivision is about ........................................................ 405
208-225. Division 207 does not generally apply ............................................ 405
208-230. Distributions to exempting entities and former exempting entities .. 405
208-235. Distributions to employees acquiring shares under eligible employee share schemes 406
208-240. Distributions to certain individuals .................................................. 406
Division 210--Venture capital franking 408
Guide to Division 210 408
210-1..... Purpose of venture capital franking ................................................. 408
210-5..... How is this achieved? ..................................................................... 408
210-10... What is a venture capital credit? ...................................................... 409
210-15... What does the PDF have to do to distribute the credits? ................. 409
210-20... Limits on venture capital franking ................................................... 409
Subdivision 210-A--Franking a distribution with a venture capital credit 410
Guide to Subdivision 210-A 410
210-25... What this Subdivision is about ........................................................ 410
210-30... Franking a distribution with a venture capital credit ........................ 410
Subdivision 210-B--Participating PDFs 410
Guide to Subdivision 210-B 410
210-35... What this Subdivision is about ........................................................ 410
210-40... What is a participating PDF ............................................................ 411
Subdivision 210-C--Distributions that are frankable with a venture capital credit 411
Guide to Subdivision 210-C 411
210-45... What this Subdivision is about ........................................................ 411
210-50... Which distributions can be franked with a venture capital credit? ... 411
Subdivision 210-D--Amount of the venture capital credit on a distribution 412
Guide to Subdivision 210-D 412
210-55... What this Subdivision is about ........................................................ 412
210-60... Amount of the venture capital credit on a distribution ..................... 412
Subdivision 210-E--Distribution statements 413
Guide to Subdivision 210-E 413
210-65... What this Subdivision is about ........................................................ 413
210-70... Additional information to be included when a distribution is franked with a venture capital credit 413
Subdivision 210-F--Rules affecting the allocation of venture capital credits 414
Guide to Subdivision 210-F 414
210-75... What this Subdivision is about ........................................................ 414
210-80... Draining the venture capital surplus when a distribution frankable with venture capital credits is made 414
210-81... Distributions to be franked with venture capital credits to the same extent 415
210-82... Consequences of breaching the rule in section 210- 81 .................... 416
Subdivision 210-G--Venture capital sub-account 416
Guide to Subdivision 210-G 416
210-85... What this Subdivision is about ........................................................ 416
210-90... The venture capital sub-account ...................................................... 417
210-95... Venture capital deficit tax ................................................................ 417
210-100. Venture capital sub-account ............................................................ 418
210-105. Venture capital credits ..................................................................... 418
210-110. Determining the extent to which a franking credit is reasonably attributable to a particular payment of tax 419
210-115. Participating PDF may elect to have venture capital credits arise on its assessment day 419
210-120. Venture capital debits ...................................................................... 420
210-125. Venture capital debit where CGT limit is exceeded ......................... 421
210-130. Venture capital surplus and deficit .................................................. 422
210-135. Venture capital deficit tax ................................................................ 423
210-140. Effect of a liability to pay venture capital deficit tax on franking deficit tax 423
210-145. Effect of a liability to pay venture capital deficit tax on the franking account 424
210-150. Deferring venture capital deficit ...................................................... 424
Subdivision 210-H--Effect of receiving a distribution franked with a venture capital credit 425
Guide to Subdivision 210-H 425
210-155. What this Subdivision is about ........................................................ 425
210-160. The significance of a venture capital credit ...................................... 426
210-165. Recipients for whom the venture capital credit is not significant ..... 426
210-170. Tax offset for certain recipients of distributions franked with venture capital credits 426
210-175. Amount of the tax offset ................................................................. 428
210-180. Application of Division 207 where the recipient is entitled to a tax offset under section 210-170 428
Division 214--Administering the imputation system 429
Guide to Division 214 429
214-1..... Purpose of the system ..................................................................... 429
214-5..... Key features .................................................................................... 429
Subdivision 214-A--Franking returns 430
Guide to Subdivision 214-A 430
214-10... What this Subdivision is about ........................................................ 430
214-15... Notice to give a franking return--general notice ............................. 431
214-20... Notice to a specific corporate tax entity ........................................... 431
214-25... Content and form of a franking return ............................................. 432
214-30... Franking account balance ................................................................ 432
214-35... Venture capital sub-account balance ................................................ 432
214-40... Meaning of franking tax .................................................................. 433
214-45... Effect of a refund on franking returns ............................................. 433
214-50... Evidence .......................................................................................... 434
Subdivision 214-B--Franking assessments 434
Guide to Subdivision 214-B 434
214-55... What this Subdivision is about ........................................................ 434
214-60... Commissioner may make a franking assessment ............................ 435
214-65... Commissioner taken to have made a franking assessment on first return 436
214-70... Part-year assessment ....................................................................... 437
214-75... Validity of assessment .................................................................... 437
214-80... Objections ....................................................................................... 437
214-85... Evidence .......................................................................................... 437
Subdivision 214-C--Amending franking assessments 438
Guide to Subdivision 214-C 438
214-90... What this Subdivision is about ........................................................ 438
214-95... Amendments within 3 years of the original assessment .................. 438
214-100. Amended assessments are treated as franking assessments ............ 439
214-105. Further return as a result of a refund affecting a franking deficit tax liability 439
214-110. Later amendments--on request ....................................................... 439
214-115. Later amendments--failure to make proper disclosure .................... 440
214-120. Later amendments--fraud or evasion .............................................. 440
214-125. Further amendment of an amended particular .................................. 441
214-135. Amendment on review etc. .............................................................. 441
214-140. Notice of amendments ..................................................................... 441
Subdivision 214-D--Collection and recovery 442
Guide to Subdivision 214-D 442
214-145. What this Subdivision is about ........................................................ 442
214-150. Due date for payment of franking tax .............................................. 442
214-155. General interest charge .................................................................... 443
214-160. Refunds of amounts overpaid ......................................................... 444
Subdivision 214-E--Records, information and tax agents 444
Guide to Subdivision 214-E 444
214-170. What this Subdivision is about ........................................................ 444
214-175. Record keeping ............................................................................... 445
214-180. Power of Commissioner to obtain information ............................... 445
Division 215--Consequences of the debt/equity rules 446
Subdivision 215-A--Application of the imputation system to non-share equity interests 446
215-1..... Application of the imputation system to non-share equity interests . 446
Subdivision 215-B--Non-share dividends that are unfrankable to some extent 446
Guide to Subdivision 215-B 446
215-5..... What this Subdivision is about ........................................................ 446
215-10... Certain non-share dividends by ADIs unfrankable ......................... 447
215-15... Non-share dividends are unfrankable if profits are unavailable ....... 448
215-20... Working out the available frankable profits ..................................... 449
215-25... Anticipating available frankable profits ........................................... 450
Division 216--Cum dividend sales and securities lending arrangements 452
Subdivision 216-A--Circumstances where a distribution to a member of a corporate tax entity is treated as having been made to someone else 452
216-1..... When a distribution made to a member of a corporate tax entity is treated as having been made to someone else 452
216-5..... First situation (cum dividend sales) ................................................. 452
216-10... Second situation (securities lending arrangements) ......................... 453
216-15... Distribution closing time ................................................................. 454
Subdivision 216-B--Statements to be made where there is a cum dividend sale or securities lending arrangement 454
216-20... Cum dividend sale--statement by securities dealer ......................... 454
216-25... Cum dividend sale--statement by party .......................................... 455
216-30... Securities lending arrangements--statement by borrower ............... 455
Division 218--Application of imputation rules to co-operative companies 456
218-5..... Application of imputation rules to co-operative companies ............. 456
Division 219--Imputation for life insurance companies 457
Guide to Division 219 457
219-1..... What this Division is about ............................................................. 457
Subdivision 219-A--Application of imputation rules to life insurance companies 457
219-10... Application of imputation rules to life insurance companies ........... 457
Subdivision 219-B--Franking accounts of life insurance companies 458
219-15... Franking credits .............................................................................. 458
219-30... Franking debits ............................................................................... 462
219-40... Residency requirement .................................................................... 463
219-45... Assessment day .............................................................................. 463
219-50... Amount attributable to shareholders' share of income tax liability .. 464
219-55... Adjustment resulting from an amended assessment ........................ 465
219-70... Tax offset under section 205-70 ...................................................... 466
219-75... Working out franking credits and franking debits where a tax offset under section 205-70 is applied 467
Division 220--Imputation for NZ resident companies and related companies 470
Guide to Division 220 470
220-1..... What this Division is about ............................................................. 470
Subdivision 220-A--Objects of this Division 470
220-15... Objects ............................................................................................ 471
220-20... What is an NZ resident ? .................................................................. 471
Subdivision 220-B--NZ company treated as Australian resident for imputation system if company chooses 472
220-25... Application of provisions of Part 3-6 outside this Division ............ 472
220-30... What is an NZ franking company ? .................................................. 472
220-35... Making an NZ franking choice ....................................................... 473
220-40... When is an NZ franking choice in force? ........................................ 473
220-45... Revoking an NZ franking choice .................................................... 473
220-50... Cancelling an NZ franking choice ................................................... 473
Subdivision 220-C--Modifications of other Divisions of this Part 474
Franking NZ franking companies' distributions 476
220-100. Residency requirement for franking ................................................ 476
220-105. Unfrankable distributions by NZ franking companies .................... 476
220-110. Maximum franking credit under section 202-60 ............................. 476
NZ franking companies' franking accounts etc. 477
220-205. Franking credit for payment of NZ franking company's withholding tax liability 477
220-210. Effect of franked distribution to NZ franking company or flowing indirectly to NZ franking company 477
220-215. Effect on franking account if NZ franking choice ceases to be in force 478
Franking accounts of NZ franking company and some of its 100% subsidiaries 479
220-300. NZ franking company's franking account affected by franking accounts of some of its 100% subsidiaries 479
Effect of NZ franking company making distribution that is non-assessable and non-exempt 482
220-350. Providing for a franking credit to arise ............................................ 482
Effects of supplementary dividend from NZ franking company 483
220-400. Gross-up and tax offset for distribution from NZ franking company reduced by supplementary dividend 483
220-405. Franked distribution and supplementary dividend flowing indirectly 484
220-410. Franking credit reduced if tax offset reduced .................................. 486
Rules about exempting entities 487
220-500. Publicly listed post-choice NZ franking company and its 100% subsidiaries are not exempting entities 487
220-505. Post-choice NZ franking company is not automatically prescribed person 488
220-510. Parent company's status as prescribed person sets status of all other members of same wholly-owned group 488
NZ franking companies' exempting accounts 489
220-605. Effect on exempting account if NZ franking choice ceases to be in force 489
Tax effect of distribution franked by NZ franking company with an exempting credit 490
220-700. Tax effect of distribution franked by NZ franking company with an exempting credit 490
Joint and several liability for NZ resident company's unmet franking liabilities 490
220-800. Joint and several liability for NZ resident company's franking tax etc. 490