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Taxation Laws Amendment Bill (No. 4) 2001
Schedule 1 Company rate changes (franking account consequentials)

   

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:

 

Certain credits and debits arising on or after 1 July 2001

Item

Event

Adjustments

1

a class A franking credit of the company arises under this Part

(a) a class A franking debit arises equal to the amount of the class A franking credit; and

(b) a class C franking credit also arises equal to the amount worked out using the formula:

2

a class A franking debit of the company arises under this Part

(a) a class A franking credit arises equal to the amount of the class A franking debit; and

(b) a class C franking debit also arises equal to the amount worked out using the formula:

3

a class B franking credit of a company arises under this Part

(a) a class B franking debit arises at that time equal to the amount of the class B franking credit; and

(b) a class C franking credit also arises at that time equal to the amount worked out using the formula:

4

a class B franking debit of a company arises under this Part

(a) a class B franking credit arises at that time equal to the amount of the class B franking debit; and

(b) a class C franking debit also arises at that time equal to the amount worked out using the formula:

5

a class C franking credit of a company arises under this Part and the amount of the credit reflects an applicable general company tax rate of 34%

(a) a class C franking debit arises at that time equal to the amount of the class C franking credit; and

(b) a class C franking credit also arises at that time equal to the amount worked out using the formula:

6

a class C franking debit of a company arises under this Part and the amount of the debit reflects an applicable general company tax rate of 34%

(a) a class C franking credit arises at that time equal to the amount of the class C franking debit; and

(b) a class C franking debit also arises at that time equal to the amount worked out using the formula:

7

a venture capital credit of the PDF arises under this Part and the amount of the credit reflects an applicable general company tax rate of 34%

(a) a venture capital debit of the PDF arises at that time equal to the amount of the venture capital credit; and

(b) a venture capital credit of the PDF also arises at that time equal to the amount worked out using the formula:

8

a venture capital debit of a PDF arises under this Part and the amount of the debit reflects an applicable general company tax rate of 34%

(a) a venture capital credit of the PDF arises at that time equal to the amount of the venture capital debit; and

(b) a venture capital debit also arises at that time equal to the amount worked out using the formula:

9

a class C franking credit of a company arises under this Part and the amount of the credit reflects an applicable general company tax rate of 36%

(a) a class C franking debit arises at that time equal to the amount of the class C franking credit; and

(b) a class C franking credit also arises at that time equal to the amount worked out using the formula:

10

a class C franking debit of a company arises under this Part and the amount of the debit reflects an applicable general company tax rate of 36%

(a) a class C franking credit arises at that time equal to the amount of the class C franking debit; and

(b) a class C franking debit also arises at that time equal to the amount worked out using the formula:

11

a venture capital credit of the PDF arises under this Part and the amount of the credit reflects an applicable general company tax rate of 36%

(a) a venture capital debit of the PDF arises at that time equal to the amount of the venture capital credit; and

(b) a venture capital credit of the PDF also arises at that time equal to the amount worked out using the formula:

12

a venture capital debit of a PDF arises under this Part and the amount of the debit reflects an applicable general company tax rate of 36%

(a) a venture capital credit of the PDF arises at that time equal to the amount of the venture capital debit; and

(b) a venture capital debit also arises at that time equal to the amount worked out using the formula:

             (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:

 

Credits and debits arising before 1 July 2001

Item

Event

Adjustments

1

a class C franking credit of a company arose under this Part and the amount of the credit reflected an applicable general company tax rate of 30%

(a) a class C franking debit equal to the amount of the class C franking credit; and

(b) a class C franking credit equal to the amount worked out using the formula:

2

a class C franking debit of a company arose under this Part and the amount of the debit reflected an applicable general company tax rate of 30%

(a) a class C franking credit equal to the amount of the class C franking debit; and

(b) a class C franking debit equal to the amount worked out using the formula:

3

a venture capital credit of a PDF arose under this Part and the amount of the credit reflected an applicable general company tax rate of 30%

(a) a venture capital debit of the PDF equal to the amount of the venture capital credit; and

(b) a venture capital credit of the PDF equal to the amount worked out using the formula:

4

a venture capital debit of a PDF arose under this Part and the amount of the debit reflected an applicable general company tax rate of 30%

(a) a venture capital credit of the PDF equal to the amount of the venture capital debit; and

(b) a venture capital debit equal to the amount worked out using the formula:

             (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:

 

Default declaration for second series dividends

 

If...

the company is taken to have declared that...

under...

1

the first series dividends were class C franked

each dividend in the second series is a class C franked dividend to the extent of the same percentage as in the original declaration

subsection 160AQF(1AAA)

2

the first series dividends were also franked with a venture capital franked amount

each dividend in the second series is a venture capital dividend to the extent of the same percentage as in the original declaration

section 160ASEL

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:

class C franked amount is the amount that is the class C franked amount of the earlier dividend.

11  Application

(1)        The amendment of the Income Tax Assessment Act 1936 made by item 1 of this Schedule applies to:

                     (a)  franking deficit tax for franking years ending on or after 1 July 2001; and

                     (b)  deficit deferral tax in relation to PAYG instalments paid during a franking year ending on or after 1 July 2001.

(2)        The amendment of the Income Tax Assessment Act 1936 made by item 2 of this Schedule applies to:

                     (a)  the payment of a class C franked dividend to a shareholder of a company on or after 1 July 2001; and

                     (b)  a trust amount or partnership amount that relates, directly or indirectly, to payment of a class C franked dividend to a shareholder in a company on or after 1 July 2001.

(3)        The amendment of the Income Tax Assessment Act 1936 made by item 4 of this Schedule applies to dividends paid on or after 1 July 2001.

(4)        The amendment of the Income Tax Assessment Act 1936 made by item 5 of this Schedule applies to deficit deferral tax in relation to PAYG instalments paid during a franking year ending on or after 1 July 2001.



 

Schedule 2 Friendly societies

   

Income Tax Assessment Act 1997

1  Subparagraph 320-35(1)(f)(ii)

Repeal the subparagraph, substitute:

                            (ia)  amounts received on or after 1 July 2001 but before 1 July 2002 that are attributable to * income bonds, * funeral policies or * scholarship plans; and

                             (ii)  amounts received on or after 1 July 2002 that are attributable to income bonds, funeral policies or scholarship plans issued before 1 December 1999.

2  Subsection 320-75(2)

Omit “1 July 2001”, substitute “1 July 2002”.

3  Subsection 320-75(3)

Omit “1 July 2001”, substitute “1 July 2002”.

4  Section 320-110

Omit “1 July 2001”, substitute “1 July 2002”.



 

Schedule 3 Prescribed dual residents

   

Income Tax Assessment Act 1936

1  Subsection 46F(3)

Omit “Subsection (2) does not apply”, substitute “Subject to subsection (3A), subsection (2) does not apply”.

2  After subsection 46F(3)

Insert:

          (3A)  Subsection (3) does not affect the application of subsection (2) to the extent that subsection (2) deals with the payment of the unfranked part of a dividend (whether or not under subparagraph (a)(i) of that subsection):

                     (a)  to a shareholder that is a prescribed dual resident at the time the dividend is paid; or

                     (b)  by a company that is a prescribed dual resident at the time the dividend is paid.

3  After paragraph 46FA(1)(b)

Insert:

                    (ba)  neither the resident company, nor the company that pays the dividend, is a prescribed dual resident; and

4  Application

The amendments of the Income Tax Assessment Act 1936 made by this Schedule apply to dividends paid on or after 1 July 2000.



 

Schedule 4 Non-complying superannuation funds and non-complying ADFs

   

Income Tax Assessment Act 1997

1  Subsection 67-25(1)

Omit “The tax offset referred to in paragraph (c) is subject to the refundable tax offset rules only if the trustee entitled to the rebate is liable to be assessed under section 98 or 99 of the Income Tax Assessment Act 1936 .”.

2  After subsection 67-25(1)

Insert:

          (1A)  The * tax offset referred to in paragraph (1)(a) is not subject to the refundable tax offset rules if the shareholder entitled to the rebate is the trustee of a * non-complying superannuation fund or a * non-complying ADF.

          (1B)  The * tax offset referred to in paragraph (1)(c) is subject to the refundable tax offset rules only if the trustee entitled to the rebate is liable to be assessed under section 98 or 99 of the Income Tax Assessment Act 1936 .

          (1C)  The * tax offset referred to in paragraph (1)(d) is not subject to the refundable tax offset rules if the taxpayer entitled to the rebate is the trustee of a * non-complying superannuation fund or a * non-complying ADF.

3  Section 995-1

Insert:

non-complying ADF has the same meaning as in Part IX of the Income Tax Assessment Act 1936 .

5  Application

The amendments of the Income Tax Assessment Act 1997 made by items 1 to 3 of this Schedule apply to assessments for income years ending on or after 22 May 2001.



 

 

Schedule  5 Miscellaneous amendments

   

Income Tax Assessment Act 1936

1  Subparagraph 160AQX(1)(b)(iii)

Omit “(other than a trustee)”.

2  Application

The amendment of the Income Tax Assessment Act 1936 made by this Schedule applies to trust amounts that are attributable to dividends paid on or after 1 July 2000.

Medicare Levy Act 1986

3  Subsection 3(1) (definition of phase-in limit )

Omit “section 160AAA”, substitute “subsection 160AAA(2)”.

4  Subsection 3(1) (definition of threshold amount )

Omit “section 160AAA”, substitute “subsection 160AAA(2)”.

5  Application

The amendments of the Medicare Levy Act 1986 made by this Schedule apply to assessments for the 2000-2001 year of income and later years of income.

 

 

 

 

 

 

 

 

 

 

 

(135/01)