Unfrankable distributions

The following distributions are specified by legislation to be unfrankable:

  • distributions from profits sourced in the Norfolk Islands from companies that are resident there
  • distributions made in respect of shares that are treated as debt instruments under the recently enacted debt test (called non-equity shares)
  • distributions funded from certain capital reserves of the company
  • distributions made by approved deposit institutions in relation to instruments that are characterised as non-share equity under the equity test
  • distributions made in relation to an instrument characterised as an equity interest under the equity test (non-share equity) where the distribution exceeds available frankable profits
  • deemed dividends made by private companies to their members (or their associates) by way of payments or loans
  • deemed dividends in relation to excessive payments made by a private company to its shareholders, directors and associates
  • distributions to controlled foreign companies that are deemed to be dividends under section 47A of the Income Tax Assessment Act 1936
  • deemed dividends in relation to capital streaming and dividend substitution arrangements, and
  • distributions made in relation to off-market buy backs of equity interests where the amount paid in respect of the buy-back exceeds the market value of the equity interest.
    Last modified: 09 Jul 2014QC 17505