Imputation system legislation introduced
Further legislation has continued the process of moving the former imputation provisions contained in Part IIIAA of the ITAA 1936 to Part 3-6 of the ITAA 1997.
The changes introduced by the subsequent Acts are generally retrospective to the start of the simplified imputation system on 1 July 2002.
The New Business Tax System (Consolidation) Act (No. 1) 2002:
provides for the head company of a consolidated group to maintain a single franking account, while the franking accounts of subsidiary members become inoperative. The Bill was passed on 27 June 2002, and received royal assent on 22 August 2002.
The New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Amendment Act 2002:
introduced consequential amendments for exempting and former exempting company provisions to limit the source of franking credits available for franking credit trading. The Bill was passed on 21 October 2002, and received royal assent on 24 October 2002.
The New Business Tax System (Consolidations and Other Measures) Act (No. 1) 2002:
included changes to the simplified imputation system to extend exemptions from the benchmark rule for publicly listed companies, remove the inter-corporate dividend rebate for franked dividends paid after 30 June 2002, and provide transitional rules for early and late balancing companies. The Bill was passed on 18 November 2002, and received royal assent on 2 December 2002.
The New Business Tax System (Franking Deficit Tax) Amendment Act 2002:
provides for the transitional determination of franking deficit tax liability for late balancing companies. The Bill was passed on 18 November 2002, and received royal assent on 2 December 2002.
The New Business Tax System (Consolidations and Other Measures) Act 2003:
introduces further provisions governing the application of the simplified imputation system to consolidated groups. The Bill makes consequential amendments to the simplified imputation system covering cum dividend sales and securities lending arrangements, as well as certain machinery provisions. There are also changes to the ITAA 1936 in relation to general anti-avoidance provisions, and certain dividend withholding tax provisions. The Bill was introduced into Parliament on 12 December 2002, and received royal assent on 11 April 2003.
The New Business Tax System (Venture Capital Deficit Tax) Act 2003:
ensures that venture capital deficit tax continues to apply under the new simplified imputation system. The Bill was introduced into Parliament on 12 December 2002 and received royal assent on 11 April 2003.
The Taxation Laws Amendment Act (No. 4) 2003:
amends the refundable tax offset rules in Division 67 of the ITAA 1997 to reflect the new simplified imputation system rules. In particular, a corporate tax entity will generally not be entitled to a refund of excess franking credits. The Bill was introduced into Parliament on 12 February 2003 and received royal assent on 30 June 2003.
Taxation Laws Amendment Act (No. 3) 2003:
allows a co-operative company to either frank distributions to shareholders or, alternatively, to claim the existing deduction for distributions of assessable income to shareholders. The Bill received royal assent on 14 October 2003 (amendments were originally introduced to Parliament in TLAB (8) 2002).
Taxation Laws Amendment Act (No. 5) 2003:
allows corporate tax entities to convert excess franking credits to losses, choose the amount of prior year losses they wish to deduct in a later year of income, and carry forward a tax loss to a later year of income if that tax loss for the income year would otherwise have been used up against franked dividend income. The Bill received royal assent on 17 December 2003.
Taxation Laws Amendment Act (No. 8) 2003:
replaces the previous franking additional tax provisions with a more efficient set of rules for franking deficit tax (FDT) and resolves the anomaly in the interaction of the debt/equity rules and imputation rules relating to non-share dividends. The anomaly prevented companies from franking non-share dividends in the manner intended by Parliament. The Bill received royal assent on 21 October 2003.
Taxation Laws Amendment Act (No. 1) 2004
received royal assent on 30 June 2004 This Act provides life insurance companies with the ability to determine the extent to which a payment of refund of tax or the receipt of franked dividend income is attributable to shareholders prior to assessment by estimating the extent to which certain transactions are reasonably attributable to the shareholders of a company. Upon assessment, the estimated franking credits and debits are reversed and reinstated in accordance with the actual extent to which tax is attributable to shareholders.
Taxation Laws Amendment (2004 Measures No.1) Act 2004:
was introduced to Parliament on 19 February 2004 and received royal assent on 29 June 2004. This Act amends Part III of the Income Tax Assessment Act 1936 to ensure that the section 46FA deduction (which allows certain resident companies a deduction for on-payments of certain unfranked or partly franked non-portfolio dividends to their wholly-owned foreign parents) continues to be available to taxpayers.
Taxation Laws Amendment (2004 Measures No.2) Act 2004:
was introduced into Parliament on 1 April 2004 and received royal assent on 25 June 2004. This Act amends Division 207 of the Income Tax Assessment Act 1997 which deals with the tax affect of receiving a franked distribution. Amendments will include adjustment rules to provide the calculation to adjust entity's assessable income where a franked distribution flows indirectly to the entity through a trust or partnership and the entity has no entitlement to a tax offset.
Tax Laws Amendment (2004 Measures No 6) Act 2005
received royal assent on 21 March 2005. This Act introduces consequential amendments that update terminology to equivalent terms of the SIS in the ITAA 1997, ITAA 1936 and Taxation Administration Act 1953, makes various technical and application amendments and inserts anti-avoidance rules that apply in relation to certain tax-exempt entities that are entitled to a refund of imputation credits
Tax Laws Amendment (2005 Measures No 2) Act 2005
received royal assent on 29 June 2005. These amendments provide greater flexibility to private companies by allowing them, in certain situations, to pay franked distributions during the income year in which they first incur an income tax liability without incurring the penalty that reduces their franking deficit tax offset by 30 per cent for that year. Applies to 2005 and onward income years.
Tax Laws Amendment (2006 Measures No 2) Act 2006
received royal assent on 22 June 2006. This amendment ensures that the tax offset reduction applies only if a company has made, directly or indirectly, a franked distribution in the relevant income year. In addition, the Commissioner of Taxation will have the discretion to disregard the tax offset reduction if the deficit in the franking account arose because of events outside the company's control. This amendment applies from 1 July 2002.
Tax Laws Amendment (2006 Measures No 3) Act 2006
received royal assent on 30 June 2006. The share capital tainting rules in this amendment replace, with some modifications, the share capital tainting rules formerly contained in Division 7B of the ITAA 1936.The share capital tainting rules are integrity rules designed to prevent a company from disguising a distribution of profits as a tax-preferred capital distribution by transferring profits into its share capital account and subsequently making distributions from that account.
Tax Laws Amendment (2007 Measures No.3) Act 2007
received royal assent on 21 July 2007. The legislation removes the dividend tainting rules with effect from 1 July 2004.