Simplified imputation: rules for exempting and former exempting entities
This fact sheet outlines amendments made to replicate the imputation provisions for exempting and former exempting entities. It also contains links to other fact sheets in the series on imputation.
The amendments made essentially replicate how the former imputation provisions for exempting and former exempting entities operated. Generally, these provisions are concerned with limiting the source of franking credits available for trading by:
- prescribing that franked distributions paid by corporate tax entities, which are effectively owned by non-residents or tax exempt entities, will provide franking benefits to resident members in limited circumstances only, and
- quarantining the franking surpluses of corporate tax entities which were formerly effectively owned by non-residents or tax exempt entities.
In particular, the amendments:
- update references and processes in the exempting and former exempting company provisions so that they are consistent with the new terms and processes introduced in the core rules for the simplified imputation system, and
- relocate the exempting and former exempting company provisions from the Income Tax Assessment Act (ITAA) 1936 to the ITAA 1997 using clearer and more accessible drafting techniques developed in the tax law improvement project.
The exempting and former exempting company provisions contained in the ITAA 1936 cease to apply to events arising after 30 June 2002. The new exempting and former exempting entity provisions contained in the ITAA 1997 apply to events arising on or after 1 July 2002.