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  • Calculation statement

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    This statement works out the tax liability (if any) where there is a taxable or net income. It also takes into account amounts that reduce the tax liability. The final outcome is the net amount the company must pay or we will refund.

    We use the information you provide in the Calculation statement to calculate the Commissioner’s instalment rate and the Commissioner’s instalment amount for taxpayers under the PAYG instalment system for the next income year.

    Complete the Calculation statement as accurately as possible, so the rate and instalment amounts we calculate result in a reliable estimate of your tax payable for 2019–20.

    To work through the Calculation statement on the tax return, begin with the right-hand column at the top.

    ABT1T5I and S of the Calculation statement are mandatory for legal or ATO purposes. Complete these labels to facilitate smooth processing of the tax return.

    In this section:

    Calculating your T5 TAX PAYABLE and S AMOUNT DUE OR REFUNDABLE

    Step 1: Write the following amounts.

    • If the amount is a positive at T Taxable/net income or loss item 7 then write the amount at A Taxable or net income.          
      • If the amount is a loss at T item 7 then write zero at A.
      • Include an amount at A even if it is zero (if zero write 0).
      • Complete A, as it is mandatory.
       
    • Write the totals for the following (CD, E and F have details within these Company tax return instructions to help you work out your totals)            
      • C Non-refundable non-carry forward tax offsets
      • D Non-refundable carry forward tax offsets
      • E Refundable tax offsets
      • F Franking deficit tax offset
      • H7 Other credits (excluding credits for foreign resident capital gains withholding).
       
    • From your records, transfer the respective amounts to          
      • M R&D recoupment tax
      • G Section 102AAM interest charge
      • H1 Credit for interest on early payments – amount of interest
      • H2 Credit for tax withheld – foreign resident withholding (excluding credits for foreign resident capital gains withholding)
      • H3 Credit for tax withheld where ABN is not quoted
      • H4 Tax withheld from interest or investments
      • H5 Credit for TFN amounts withheld from payments from closely held trusts
      • H8 Credit for foreign resident capital gains withholding amounts
      • K PAYG instalments raised.
       
    • For retirement savings accounts (RSA) providers only          
      • write at U in item 19 the amount of no-TFN contributions income; if zero write 0
      • write at X in item 19 the amount of tax payable on no-TFN contributions income; if zero, write 0.
       

    Step 2: Work out the amount at T1 by referring to Appendix 7 for the tax rates.

    • If any tax is payable (a positive amount) on the amount at A, write this tax payable amount at T1.          
      • Include an amount at T1 even if it is zero (if zero write 0).
      • Complete T1, as it is mandatory.
       

    Step 3: Work out the amount at B Gross Tax (for more information, see the label instructions).

    • Add T1 and M.
    • For RSAs, add T1M and the amount at X Income tax payable on no-TFN contributions income item 19.
    • Write the result at B.

    Step 4: Work out the amount at T2 Subtotal 1 (for more information, see the label instructions and examples).

    • If the amount at C is less than the amount at B Gross tax          
      • take C away from B
      • write the result at T2
      • go to step 5.
       
    • If the amount at C is more than or equal to the amount at B Gross Tax            
      • Write zero at each of T2T3 Subtotal 2, T4 Subtotal 3 and T5 Tax Payable            
        • include an amount at T5 even if it is zero (if zero write 0)
        • complete T5, as it is mandatory
         
      • the amount at D and F may be carried forward to a later income year (subject to the tax offset carry forward rules in Division 65 of the ITAA 1997)
      • copy the amount at E to I Tax offset refunds (Remainder of refundable tax offsets)           
        • an amount must be included at I even if it is zero (if zero write 0)
        • complete I as it is mandatory
         
      • go to step 8.
       

    Step 5: Work out the amount at T3 (for more information, see the label instructions and examples).

    • If the amount at D is less than the amount at T2          
      • take D away from T2
      • write the result at T3
      • go to step 6.
       
    • If the amount at D is more than or equal to the amount at T2            
      • Write zero at T3T4 and T5
      • the difference between T2 and D (take T2 away from D) may be carried forward to later income year (subject to the tax offset carry forward rules in Division 65 of the ITAA 1997)
      • the amount at F may be carried forward to a later income year
      • copy the amount at E to I
      • go to step 8.
       

    Step 6: Work out the amount at T4 (for more information, see the label instructions and examples).

    • If the amount at E is less than the amount at T3            
      • take E away from T3
      • write the result at T4
      • write zero at I
      • go to step 7.
       
    • If the amount at E is more than or equal to the amount at T3            
      • take T3 away from E and write the result at I
      • write zero at T4 and at T5
      • the amount at F may be carried forward to a later income year
      • go to step 8.
       

    Step 7: Work out the amount at T5 (for more information, see the label instructions and examples).

    • If the amount at F is less than the amount at T4            
      • take F away from T4
      • write the result at T5
      • go to step 8.
       
    • If the amount at F is more than or equal to the amount at T4            
      • write zero at T5
      • the result of taking T4 away from F, may be carried forward to a later income year
      • go to step 8.
       

    Step 8: Work out the amount at H:

    • add from H1 to H8 and write the result at H
    • go to step 9.

    Step 9: Work out the amount at S Amount due or refundable:

    • add T5 and G, and then take away HI and K
    • write the result at S
    • if the amount at S is positive, that amount is payable by you.
    • if the amount at S is negative, that amount is refundable to you.

    A –Taxable or net income

    If the company is a resident company for tax purposes, taxable income equals assessable income derived from all sources less allowable deductions incurred in gaining that income.

    If the company is a non-resident company, taxable income equals assessable income derived from sources within Australia, plus income that is included on some basis other than having an Australian source, less allowable deductions incurred in gaining that income.

    Taxable income takes into account any concessions or adjustments allowable for income tax purposes.

    Write at A the amount of taxable income of $1 or more. The amount at A will often be the amount written at T Taxable/net income or loss. Write zero (0) at A if the company has no taxable income or has a loss amount written at T Taxable/net income or loss item 7 with L in the box at the right of the amount.

    Complete A as it is mandatory.

    Public trading trusts and corporate unit trusts with an income year that started before 1 July 2016 show net income at A.

    T1 – Tax on taxable or net income

    Write at T1 the amount of tax payable before the allowance of any rebates, tax offsets, credits or FDT offsets. The tax rates applicable to companies are listed in Appendix 7.

    An amount must be included at T1 even if it is zero (if zero write 0). Complete T1 as it is mandatory.

    M – R&D recoupment tax

    Show at M the extra tax required on your recoupment as calculated under Subdivision 355-G of the ITAA 1997.

    If you have claimed the R&D tax incentive and you have received or become entitled to receive a government recoupment (such as a government grant or reimbursement) that relates to expenditure that you or a related entity have claimed a notional deduction for under the R&D tax incentive, the income tax you are liable to pay on the recoupment will be increased. This is referred to as a clawback adjustment.

    The amount to be shown at M is the extra income tax required on your recoupment.

    The clawback adjustment is capped so that the extra tax payable cannot exceed the amount of the grant you received.

    For more information about how this amount is calculated, see Clawback adjustments.

    B – Gross tax

    If you are not an RSA provider, write at B the total of amounts at T1 and M.

    If you are an RSA provider, write at B the total of amounts at T1M and any further tax on no-TFN contributions recorded at X item 19.

    Complete B to ensure smooth processing of your tax return.

    For more information on the further tax on no-TFN contributions, see Tax file numbers and super contributions.

    Priority of use of tax offsets

    The first category of tax offsets to be applied against gross tax is C Non-refundable non-carry forward tax offsets. If the offsets are greater than the gross tax, the excess offsets cannot be used and are lost.

    If tax is still payable after applying this category of offsets, at T2 Subtotal 1, the second category, D Non-refundable carry forward tax offsets, is applied against any remaining tax payable at T2.

    Any excess of offsets in this category may be carried forward to the next year (subject to the tax offset carry forward rules in Division 65 of the ITAA 1997). If tax is still payable after applying the Non-refundable carry forward tax offsets at T3 Subtotal 2, the third category E Refundable tax offsets is applied against the tax remaining. Any excess of refundable tax offsets above the residual tax payable at T3 becomes part of the credits available to you and is shown at I Remainder of refundable tax offsets.

    However, if tax is still payable at T4 Subtotal 3 after applying tax offsets from the above three categories, F Franking deficits tax offsets are applied against this remaining tax to determine your tax payable amount. Any excess of F over the residual tax payable at T4 may be carried forward to a later income year.

    C – Non-refundable non-carry forward tax offsets

    Write at C the total of actual rebates and tax offsets available (in dollars and cents) and not the amounts giving rise to those tax offsets.

    The rebates and tax offsets shown at C are not refundable, nor are they carried forward. They are only offset against gross tax. Gross tax cannot be less than zero. If these tax offsets are greater than the gross tax, the excess tax offsets cannot be used and are lost.

    Tax offsets to be shown at C include:

    Calculation element

    Amount

    Allowable franking tax offsets for the income year. The amount claimed here should include the share of franking credits included in gross distributions from partnerships and gross distributions from trusts, the amount recorded at J Franking credits item 7 and the amount recorded at C Australian franking credits from a New Zealand company item 7. If the shares or relevant interest are not held at risk as required under the holding period and related payments rules, or there is other manipulation of the imputation system, there is no entitlement to a franking tax offset.

    $

    Tax offsets for bonuses and certain other amounts received under short-term life insurance policies taken out after 27 August 1982

    $

    Foreign income tax offset (the amount at J item 20)

    (Subject to some transitional rules)

    For more information, see 20 Foreign income tax offset.

    $

    TOTAL of all non-refundable non-carry forward tax offsets (write this amount at C)

    $

    Do not show at C:

    • any FDT offset; write this amount at F Franking deficit tax offset.

    Record keeping

    Keep a record of the following:

    • for each type of tax offset            
      • the amount claimed for each type
       
    • for franking tax offsets          
      • the distribution statement, which contains the            
        • name of the payer
        • date the dividend was received or credited
        • franked amount of the dividend
        • unfranked amount of the dividend
        • franking credit allocated to the dividend
        • amount of franking credit tax offsets allowable for each franked dividend received
        • franking percentage of the dividend
         
      • and other records to substantiate            
        • deductions relating to dividends
        • the type of distribution: for example, foreign source dividend, bonus shares, phasing-out dividend, liquidator’s distribution
        • the dates on which shares, for which dividends were received and tax offsets claimed, were acquired and disposed of
         
       
    • for short-term life insurance policies            
      • a copy of the policy
      • the amount of the bonus included in assessable income under section 26AH of the ITAA 1936.
       

    T2 – Subtotal 1

    Write at T2 the amount of tax payable after C has been offset against B Gross tax.

    T2 cannot be less than zero.

    Work out the amount at T2 as follows.

    • If the amount at C is less than the amount at B            
      • take C away from B
      • write the result at T2.
       
    • If the amount at C is more than or equal to the amount at B            
      • write zero at T2T3T4 and T5
      • the amount at D and F may be carried forward to a later income year (subject to the tax offset carry forward rules in Division 65 of the ITAA 1997)
      • copy the total amount at E to I.
       

    Example 15a

    Dark Blue Co. Pty Ltd, a base rate entity, has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $10,000

    B

    Gross tax (27.5%)

    $2,750

    C

    Non-refundable non-carry forward tax offset

    $2,000

    T2

    Subtotal 1

    $750

    T3

    Subtotal 2

    $750

    T4

    Subtotal 3

    $750

    T5

    TAX PAYABLE

    $750

    I

    Tax offset refunds (remainder of refundable tax offsets)

    $0

    S

    AMOUNT DUE OR REFUNDABLE

    $750

    The lower company tax rate of 27.5% has been applied in this example.

    Dark Blue Co. Pty Ltd has an entitlement of $2,000 of non-refundable non-carry forward tax offset to be used to offset against $2,750 gross tax.

    • Tax payable has been reduced to $750.
    • T3T4 and T5 should also show $750, indicating that no other offsets are available to be used.
    • I must also show $0.
    End of example

     

    Example 15b

    Light Blue Co. Pty Ltd, a base rate entity, has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $10,000

    B

    Gross tax (27.5%)

    $2,750

    C

    Non-refundable non-carry forward tax offset

    $4,000

    T2

    Subtotal 1

    $0

    T3

    Subtotal 2

    $0

    T4

    Subtotal 3

    $0

    T5

    TAX PAYABLE

    $0

    I

    Tax offset refunds (remainder of refundable tax offsets)

    $0

    S

    AMOUNT DUE OR REFUNDABLE

    $0

    The lower company tax rate of 27.5% has been applied in this example.

    Light Blue Co. Pty Ltd has an entitlement of $4,000 of non-refundable non-carry forward tax offset to be used to offset against $2,750 gross tax.

    • Tax payable has been reduced to $0.
    • Light Blue Co. Pty Ltd will have $1,250 of non-refundable non-carry forward tax offset remaining that it will lose as tax payable has been reduced to $0.
    • T3T4T5 and I must also show $0.
    End of example

    D – Non-refundable carry forward tax offsets

    Write at D the total of actual tax offsets available (in dollars and cents) and not the amounts giving rise to those tax offsets.

    The tax offsets shown at D are not refundable. They are only offset against gross tax, if there is any gross tax to be paid after C has been applied to gross tax. Gross tax cannot be less than zero. Any excess offsets can be carried forward to a later income year (subject to the tax offset carry forward rules in Division 65 of the ITAA 1997).

    Before you can apply a tax offset carried forward from a prior year to reduce the amount of income tax that you will pay, you must apply it to reduce certain amounts of net exempt income. Net exempt income is reduced by $1 for each 27.5 cents of the tax offset if the company is a base rate entity, otherwise $1 for each 30 cents of the tax offset.

    Tax offsets to be shown at D include:

    Tax offsets

    Amount

    Landcare and water facility tax offset carried forward from prior years

    $

    Early stage venture capital limited partnership tax offset (the amount at L item 22)

    $

    Early stage venture capital limited partnership tax offset carried forward from previous year (the amount at P item 22)

    $

    Early stage investor tax offset (the amount at M item 23)

    $

    Early stage investor tax offset carried forward from previous year (the amount at R item 23)

    $

    Non-refundable R&D tax offset (the amount at A item 21)

    $

    Non-refundable R&D tax offset carried forward from previous year (the amount at B item 21)

    $

    TOTAL of all non-refundable carry forward tax offsets (write this amount at D)

    $

    T3 – Subtotal 2

    Write at T3 the amount of tax payable after D has been offset against T2.

    T3 cannot be less than zero.

    Work out the amount at T3 as follows.

    • If the amount at D is less than the amount at T2            
      • take D away from T2
      • write the result at T3.
       
    • If the amount at D is more than or equal to the amount at T2            
      • write zero at T3T4 and T5
      • the difference between T2 and D (take T2 away from D) may be carried forward to a later income year (subject to the tax offset carry forward rules in Division 65 of the ITAA 1997)
      • the amount at F may be carried forward to a later income year
      • copy the total amount at E to I.
       

    Example 16a

    Dark Green Co. Pty Ltd, a base rate entity has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $20,000

    B

    Gross tax (27.5%)

    $5,500

    C

    Non-refundable non-carry forward tax offset

    $3,000

    T2

    Subtotal 1

    $2,500

    D

    Non-refundable carry forward tax offset

    $2,000

    T3

    Subtotal 2

    $500

    T4

    Subtotal 3

    $500

    T5

    TAX PAYABLE

    $500

    I

    Tax offset refunds (remainder of refundable tax offsets)

    $0

    S

    AMOUNT DUE OR REFUNDABLE

    $500

    The lower company tax rate of 27.5% has been applied in this example.

    Dark Green Co. Pty Ltd has an entitlement of $3,000 of non-refundable non-carry forward tax offset and $2,000 of non-refundable carry forward tax offset to be used to offset against $5,500 gross tax.

    • Tax payable has been reduced to $500.
    • T4 and T5 should also show $500, indicating that no other offsets are available to be used.
    • I must also show $0.
    End of example

     

    Example 16b

    Light Green Co. Pty Ltd, a base rate entity, has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $20,000

    B

    Gross tax (27.5%)

    $5,500

    C

    Non-refundable non-carry forward tax offset

    $3,000

    T2

    Subtotal 1

    $2,500

    D

    Non-refundable carry forward tax offset

    $4,000

    T3

    Subtotal 2

    $0

    T4

    Subtotal 3

    $0

    T5

    TAX PAYABLE

    $0

    I

    Tax offset refunds (Remainder of refundable tax offsets)

    $0

    S

    AMOUNT DUE OR REFUNDABLE

    $0

    The lower company tax rate of 27.5% has been applied in this example.

    Light Green Co. Pty Ltd has an entitlement of $3,000 of non-refundable non-carry forward tax offset and $4,000 of non-refundable carry forward tax offset to be used to offset its gross tax to $0.

    • Light Green Co. Pty Ltd will have $1,500 of non-refundable carry forward tax offset remaining that can be carried over to the next income year (subject to the tax offset carry forward rules in Division 65 of the ITAA 1997), as tax payable has been reduced to $0.
    • T4T5 and I must also show $0.
    End of example

    E – Refundable tax offsets

    Write at E the total of actual tax offsets available (in dollars and cents) and not the amounts giving rise to those tax offsets.

    The tax offsets shown at E are refundable, although they must first be offset against gross tax, if there is any gross tax to be paid after C and D have been applied to gross tax. Gross tax cannot be less than zero. Any excess offsets should be recorded at I and will be available as a refundable (credit) amount for the purpose of calculating the tax liability. An amount must be included at I even if it is zero (if zero write 0). Complete I as it is mandatory.

    Tax offsets to be shown at E include:

    Calculation element

    Amount

    R&D tax offset (the amount at U item 21)

    $

    Film tax offsets under Division 376 of the ITAA 1997

    $

    Franking tax offsets claimed by life insurance companies to the extent that they relate to distributions paid on shares and other membership interests held on behalf of policy holders

    $

    Franking credits claimed by endorsed income tax exempt entities and deductible gift recipients that are entitled to a refund of excess franking credits. These entities may complete the Application for refund of franking credits – Endorsed income tax exempt entities and deductible gift recipients (NAT 4131), rather than the company tax return to obtain a refund

    $

    No-TFN tax offset claimed by RSA providers.

    For more information on the no-TFN tax offset, see Tax file numbers and super contributions.

    $

    NRAS tax offset (the amount at J item 12)

    $

    The tax offset available under subsection 713-545(5) of the ITAA 1997 where a life insurance company’s subsidiary joins a consolidated or MEC group

    $

    Exploration credit tax offsets allowable to a life insurance company under section 418-15 of the ITAA 1997

    $

    Seafarer tax offset under Subdivision 61-N of the ITAA 1997

    $

    TOTAL of all refundable tax offsets (write this amount at E)

    $

    Record keeping

    Keep a record of the following:

    • for each type of tax offset          
      • the amount claimed for each type
       
    • or franking tax offsets          
      • the distribution statement, which contains the            
        • name of the payer
        • date the dividend was received or credited
        • franked amount of the dividend
        • unfranked amount of the dividend
        • franking credit allocated to the dividend
        • amount of franking credit tax offsets allowable for each franked dividend received
        • franking percentage of the dividend
         
      • and other records to substantiate            
        • deductions relating to dividends
        • the type of distribution; for example, foreign source dividend, bonus shares, phasing-out dividend, liquidator’s distribution
        • the dates on which shares, for which dividends were received and tax offsets claimed, were acquired and disposed of.
         
       

    T4 – Subtotal 3

    Write at T4 the amount of tax payable after E has been offset against T3.

    T4 cannot be less than zero.

    Work out the amount at T4 as follows.

    • If the amount at E is less than the amount at T3            
      • take E away from T3
      • write the result at T4
      • write zero at I.
       
    • If the amount at E is more than or equal to the amount at T3            
      • take T3 away from E and write the result at I
      • an amount must be included at I even if it is zero (if zero write 0)
      • complete I as it is mandatory
      • write zero at T4 and T5
      • the amount at F may be carried forward to a later income year.
       

    Example 17a

    Dark Orange Co. Pty Ltd, a base rate entity, has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $30,000

    B

    Gross tax (27.5%)

    $8,250

    C

    Non-refundable non-carry forward tax offset

    $3,000

    T2

    Subtotal 1

    $5,250

    D

    Non-refundable carry forward tax offset

    $3,000

    T3

    Subtotal 2

    $2,250

    E

    Refundable tax offset

    $2,000

    T4

    Subtotal 3

    $250

    T5

    TAX PAYABLE

    $250

    I

    Tax offset refunds (remainder of refundable tax offsets)

    $0

    S

    AMOUNT DUE OR REFUNDABLE

    $250

    The lower company tax rate of 27.5% has been applied in this example.

    Dark Orange Co. Pty Ltd has an entitlement of $3,000 of non-refundable non-carry forward tax offset, $3,000 of non-refundable carry forward tax offset and $2,000 of refundable tax offset to be used to offset against $8,250 gross tax.

    • Tax payable has been reduced to $250.
    • T5 should also show $250, indicating that no other offsets are available to be used.
    • I must also show $0.
    End of example

     

    Example 17b

    Light Orange Co. Pty Ltd, a base rate entity, has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $30,000

    B

    Gross tax (27.5%)

    $8,250

    C

    Non-refundable non-carry forward tax offset

    $3,000

    T2

    Subtotal 1

    $5,250

    D

    Non-refundable carry forward tax offset

    $3,000

    T3

    Subtotal 2

    $2,250

    E

    Refundable tax offset

    $4,000

    T4

    Subtotal 3

    $0

    T5

    TAX PAYABLE

    $0

    I

    Tax offset refunds (remainder of refundable tax offsets)

    $1,750

    S

    AMOUNT DUE OR REFUNDABLE

    $1,750

    The lower company tax rate of 27.5% has been applied in this example.

    Light Orange Co. Pty Ltd has an entitlement of $3,000 of non-refundable non-carry forward tax offset, $3,000 of non-refundable carry forward tax offset and $4,000 of refundable tax offset to be used to offset against $8,250 gross tax.

    • Tax payable has been reduced to $0.
    • Light Orange Co. Pty Ltd will have a $1,750 of refundable tax offset remaining that should be transferred to I, as tax payable can ONLY be reduced to $0.
    • An amount must be included at I even if it is zero (if zero write 0). Complete I as it is mandatory. It can then be used to reduce Amount Due or be refunded.
    • T4 and T5 should also show $0.
    End of example

    F – Franking deficit tax offset

    Write this amount at F.

    The tax offsets shown at F are not refundable. They are only offset against gross tax, if there is any gross tax to be paid after CD and E have been applied to gross tax. Gross tax cannot be less than zero. Any excess of FDT offset can be carried forward to the next income year.

    Tax offsets to be shown at F include:

    Calculation element

    Amount

    Current year FDT offset

    Prior year FDT offset

    $

    TOTAL of all FDT offsets (write this amount at F)

    $

    Under the simplified imputation system, entities that have incurred a FDT liability may be allowed to offset the whole or part of this amount against an income tax liability. Some special rules apply to life insurance companies to ensure that a FDT liability can only be offset against that part of the company’s income tax liability that is attributable to shareholders.

    A corporate tax entity is entitled to apply the FDT offset to reduce its income tax liability for an income year if it satisfies the residency requirement and at least one of the following conditions:

    • it incurred a liability to pay FDT in that year
    • it carried forward an amount of FDT offset from a previous year, and not all the FDT offset could be applied against a previous income tax liability
    • it incurred a liability to pay FDT in a previous year when it did not meet the residency requirement, and that liability has not been included in calculating the FDT offset.

    Generally, an entity satisfies the residency requirement for an income year if it is an Australian resident for more than one half of the year, or it is a resident at all times during the year when it exists.

    The FDT offset rules contain provisions that reduce the amount of FDT liability that an entity can use to offset against its income tax liability in certain circumstances.

    The FDT offset reduction will only apply for an income year for franking debits in an entity’s franking account arising under items 135 or 6 of the table in section 205-30 of the ITAA 1997, and if one of these items applies then any franking debit under item 2 of that table (relating to income tax refunds) will also be relevant. These debits usually arise as a result of having franked a distribution.

    The amount of the FDT offset is reduced where the amount of the FDT liability, which is attributable to the franking debits for items 123, 5 and 6, is greater than 10% of the total amount of credits that arose in the franking account for the year. The amount of the reduction is equal to 30% of that part of the FDT liability attributable to those franking debits. For more information on the debits to the franking account that affect the amount of offset and how to calculate this amount, see Franking account tax return and instructions 2020.

    There is an exception to the reduction rule for private companies with no previous income tax liability where certain conditions are met. The Commissioner also has discretion to allow the full FDT liability as an offset where the FDT liability arose due to events outside the entity’s control.

    To determine the amount of the FDT offset to which the company is entitled for the income year, use the following method. These steps are modified in certain circumstances. See Exclusions from the offset reduction rule.

    Step 1: Work out the amount of FDT liability that the entity has incurred in the income year.

    Step 2: Did any franking debits arise in the entity’s franking account under items 135 or 6 of section 205-30 of the ITAA 1997 for that income year?

    • If yes, go to step 3.
    • If no, the FDT offset reduction does not apply. The amount of FDT liability from step 1 is the amount of the FDT offset that the entity is entitled to for the current income year. Go to step 5.

    Step 3: Work out the amount of FDT liability attributable to franking debits under items 1235 and 6 for that income year.

    To do this add together the opening credit balance (if any) of the franking account and any franking credits that arose in the account for the income year. Take away from this amount the total of the franking debits under items 1235 and 6.

    If there is an excess of franking credits over franking debits (or they are equal), the FDT offset reduction does not apply and the amount of FDT liability from step 1 is the amount of the FDT offset that the entity is entitled to for the current income year. Go to step 5.

    If there is an excess of franking debits over franking credits, this is the amount of FDT liability attributable to items 1235 and 6. Go to step 4.

    Step 4: If the excess of franking debits over franking credits worked out at step 3 is less than or equal to 10% of the total franking credits that arose in the franking account for the same year, the FDT offset reduction does not apply and the amount of FDT liability from step 1 is the amount of the FDT offset that the entity is entitled to for the current year. Go to step 5.

    If that excess is greater than 10% of the total franking credits that arose in the franking account for that income year, the FDT offset reduction applies as follows:

    • Work out 30% of that excess. This is the reduction amount. Reduce the amount of FDT liability for that income year from step 1 by the reduction amount. This is the amount of the FDT offset that the entity is entitled to for the current year. Go to step 5.

    Step 5: For each previous income year for which the entity did not meet the residency requirement, repeat steps 1–4 for that income year to work out the amount of that previous year’s FDT liability that is eligible to be claimed as an offset and that has not previously been claimed as an offset.

    Add up the amounts covered by this step 5 for all the previous income years in which the entity did not meet the residency requirements. Go to step 6.

    Step 6: For each previous income year for which the entity did meet the residency requirement and was entitled to the FDT offset, work out the amount of any excess FDT offset. This is the amount of FDT offset that exceeded the entity’s hypothetical income tax liability for that previous year (worked out as if the entity did not have an FDT offset but did have all its other tax offsets). Go to step 7.

    Step 7: Add up any FDT offset amounts from steps 2, 3 or 4 (these relate to any FDT liability incurred in 2019–20) and any offsettable portions of previous year FDT amounts from steps 5 and 6. This is the total amount of FDT offset the entity is entitled to for the current income year.

    Reduction in FDT that can be offset

    Steps 2 to 4 in the above method statement show that the amount of the FDT offset that you can claim may be reduced in some situations. This reduced amount should equal the amount you completed at C Offsetable portion of current year FDT in section B of the Franking account tax return and instructions 2020.

    See also:

    Example 18

    In 2016–17, Stripe Co. Ltd franked a distribution with franking credits of $13,000 (item 1 of section 205-30 of the ITAA 1997: debit to the franking account). The company’s franking account showed that franking credits of $10,000 arose during the year. Stripe Co. Ltd’s franking account has a $3,000 deficit at the end of the income year, resulting in the company incurring an FDT liability of this amount. As the franking deficit from the item 1 debit is greater than 10% of the total franking credits that arose during the year, the offset is reduced by 30% of that portion of the deficit. Therefore Stripe Co. Ltd will only be able to offset $2,100 of its FDT liability of $3,000 against its current or future income tax liabilities. The remaining $900 will not be offsettable at any time.

    End of example

    Exclusions from the offset reduction rule

    Private companies with no previous income tax liability

    The FDT offset reduction rule will not apply if all the following conditions are met:

    1. the entity is a private company for the relevant year
    2. the company has not had an income tax liability for any income year before the relevant year
    3. if the company did not have the tax offset (but had all its other tax offsets) it would have had an income tax liability for the relevant year, and
    4. the amount of the liability referred to in paragraph (c) is at least 90% of the amount of the deficit in the company’s franking account at the end of the relevant year.
    Commissioner’s discretion where deficit was outside the entity’s control

    The Commissioner has discretion to allow the full tax offset where the FDT liability arose due to circumstances that were outside the entity’s control.

    For more information on the application of these exclusions, see Imputation: Franking deficit tax offset. Entitlement to the full offset resulting from one of the exclusions mentioned above should have been noted by inserting the code FP or C in the CODE box in section A on the Franking account tax return 2020. If you did not do this, you will need to request an amendment to that return in order to receive the full offset.

    The amount completed at E Franking deficit tax offset in this return will not necessarily be the same as the amount shown at C Offsetable portion of current year FDT in section B of the Franking account tax return 2020. For information on how to complete C Offsetable portion of current year FDT, see Franking account tax return and instructions 2020.

    T5 – Tax payable

    Write at T5 the amount of tax payable after F has been offset against T4.

    Work out the amount at T5 as follows:

    • If the amount at F is less than the amount at T4            
      • take F away from T4
      • write the result at T5.
       
    • If the amount at F is more than or equal to the amount at T4            
      • write zero at T5
      • the difference between T4 and F (take T4 away from F) may be carried forward to a later income year.
       

    T5 cannot be less than zero. Include an amount even if it is zero (if zero write 0). Complete T5 as it is mandatory.

    Example 19a

    Dark Red Co. Pty Ltd, a base rate entity has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $42,000

    B

    Gross tax (27.5%)

    $11,550

    C

    Non-refundable non-carry forward tax offset

    $3,000

    T2

    Subtotal 1

    $8,550

    D

    Non-refundable carry forward tax offset

    $3,000

    T3

    Subtotal 2

    $5,550

    E

    Refundable tax offset

    $3,000

    T4

    Subtotal 3

    $2,550

    F

    Franking deficit tax offset

    $2,000

    T5

    TAX PAYABLE

    $550

    I

    Tax offset refunds (remainder of refundable tax offsets)

    $0

    S

    AMOUNT DUE OR REFUNDABLE

    $550

    The lower company tax rate of 27.5% has been applied in this example.

    Dark Red Co. Pty Ltd has an entitlement of $3,000 of non-refundable non-carry forward tax offset, $3,000 of non-refundable carry forward tax offset, $3,000 of refundable tax offset and $2,000 of franking deficit tax offset to be used to offset against $11,550 gross tax.

    • Tax payable has been reduced to $550.
    • I must show $0.
    End of example

     

    Example 19b

    Light Red Co. Pty Ltd, a base rate entity, has the following amounts entered into its company tax return:

    Tax return information

    Label

    Description

    Amount

    A

    Taxable income

    $42,000

    B

    Gross tax (27.5%)

    $11,550

    C

    Non-refundable non-carry forward tax offset

    $3,000

    T2

    Subtotal 1

    $8,550

    D

    Non-refundable carry forward tax offset

    $3,000

    T3

    Subtotal 2

    $5,550

    E

    Refundable tax offset

    $3,000

    T4

    Subtotal 3

    $2,550

    F

    Franking deficit tax offset

    $4,000

    T5

    TAX PAYABLE

    $0

    I

    Tax offset refunds (remainder of refundable tax offsets)

    $0

    S

    AMOUNT DUE OR REFUNDABLE

    $0

    The lower company tax rate of 27.5% has been applied in this example.

    Light Red Co. Pty Ltd has an entitlement of $3,000 of non-refundable non-carry forward tax offset, $3,000 of non-refundable carry forward tax offset, $3,000 of refundable tax offset and $4,000 of franking deficit tax offset to be used to offset against $11,550 gross tax.

    • Tax payable has been reduced to $0.
    • I must show $0.
    • Light Red Co. Pty Ltd will have a $1,450 remaining (of FDT offset) that can be carried over to the next income year, as tax payable has been reduced to $0.
    End of example

    G – Section 102AAM interest charge

    Write at G any section 102AAM interest relating to a distribution received from a non-resident trust. Section 102AAM of the ITAA 1936 imposes an interest charge on certain distributions from non-resident trusts.

    For more information, see chapter 2 of the Foreign income return form guide 2020.

    H – Eligible credits

    Write at H the total of the amounts:

    H1 – Credit for interest on early payments – amount of interest

    Write at H1 only the calculated interest amount of 50 cents or more for early payment. Do not show actual payments.

    Interest may be payable where an actual payment is made on account of certain amounts more than 14 days before the due date of payment. Amounts that may attract early payment interest include payments of:

    • income tax
    • shortfall interest charge
    • interest payable under section 102AAM of the ITAA 1936.

    Amounts that are not directly paid to us, but are reduced by the crediting or applying of an amount do not attract early payment interest. These amounts include:

    • credit for instalments payable under the PAYG instalment regime
    • credit for amounts withheld from withholding payments under the PAYG withholding regime
    • an overpayment of other income tax liabilities
    • a running balance account (RBA) surplus
    • any other credit entitlement arising under a taxation law.

    Early payment interest is also not payable on any part of the payment that:

    • exceeds the amount due
    • attracts interest on overpayment.

    Early payment interest is calculated from the date the early payment is made to the date the amount becomes due and payable. However, where an amount that is paid early is refunded before the day it becomes due and payable, interest does not accrue for any period after the day it is refunded.

    Date of payment is the date:

    • shown on the receipt
    • the payment is posted to us, plus three business days, or
    • shown on the taxpayer’s bank statement where payment is made through direct debit; that is, electronic funds transfer (EFT).
    Table 10: Interest rates for early payment

    Quarter

    Interest rate (pa)

    Jul–Sep 2019

    1.54%

    Oct–Dec 2019

    0.98%

    Jan–Mar 2020

    0.91%

    Apr-Jun 2020

    0.89%

    If the early payment extends over two or more interest periods, calculate the interest for the number of days in each period.

    Interest is calculated as follows:

    Step 1. Divide the number of days by 365, or 366 for a leap year. Step 2. Divide the interest rate for the period by 100. Step 3. Multiply the result from step 1 by the amount of payment. Step 4. Multiply the result from step 3 by the result from step 2.

    Keep a record of the amount of early payment interest claimed. This interest is assessable income in the income year it is paid or credited against another liability.

    H2 – Credit for tax withheld – foreign resident withholding

    Only complete H2 if the amount was withheld in Australia and remitted to the ATO.

    Write at H2 the total tax withheld from payments made to the company that were subject to foreign resident withholding.

    This includes any share of credits received by the company from a partnership or trust.

    If an amount of tax withheld is shown at H2, ensure that you include the corresponding gross payment at Income, B Gross payments subject to foreign resident withholding item 6, or the corresponding gross distribution from a partnership or trust at Income, D or E item 6.

    Only complete H2 if the company is a foreign resident. An Australian resident should not claim at H2 a foreign income tax offset (FITO) for foreign tax paid on foreign source income.

    Do not include credits for foreign resident capital gains withholding at H2. Include these at H8 Credit for foreign resident capital gains withholding amounts.

    H3 – Credit for tax withheld where ABN is not quoted

    Write at H3 the total tax withheld from payments made to the company that were subject to withholding where an ABN was not quoted.

    This amount equals the sum of the amounts shown in the relevant ‘tax withheld’ boxes on the Non-individual PAYG payment summary schedule 2020. For instructions on completing the schedule, see Non-individual PAYG payment summary schedule 2020.

    Do not include any share of tax withheld from a partnership or trust distribution where an ABN was not quoted. This is shown at H7 Other credits.

    If an amount of tax withheld is reported at H3, declare the corresponding gross payment at Income, A Gross payments where ABN not quoted item 6.

    H4 – Tax withheld from interest or investments

    Write at H4 any amounts withheld from investment income by an investment body because the company did not provide a TFN or ABN and that have not been refunded already to the company.

    Record keeping

    Keep the following details of credits for amounts withheld from investments:

    • all documentation issued by the investment body detailing payments of income and any amounts withheld from those payments
    • details of any amounts withheld from an income payment made to the company and subsequently refunded by the investment body.

    Keep the following details of refund receipts:

    • amount of refund
    • date of refund
    • investment reference number; for example, the bank account number of the investment relating to the refund.

    H5 – Credit for TFN amounts withheld from payments from closely held trusts

    Show at H5 the total amounts withheld from payments where a TFN has not been provided to a trustee of a closely held trust.

    If amounts have been withheld from distributions to the company under these rules, the company is required to receive a payment summary in the approved form from the trustee.

    For more information, see TFN withholding for closely held trusts.

    H7 – Other credits

    Write at H7:

    • the company’s share of credit from a partnership or trust for tax withheld where an ABN was not quoted
    • the company’s share of credit for tax paid by a trustee on net income
    • for RSA providers, interest on no-TFN tax offset. Write on a schedule of additional information the amount of interest on no-TFN tax offset that you included at H7. Attach the schedule to your tax return.

    For more information, see Interest on no-TFN tax offset.

    Do not include at H7 those credits included at J Foreign income tax offset item 20. Also, do not include at H7 any amounts that relate to PAYG instalments. Include these at K PAYG instalments raised.

    Do not include credits for foreign resident capital gains withholding at H7. Include these at H8 Credit for foreign resident capital gains withholding amounts.

    H8 – Credit for foreign resident capital gains withholding amounts

    Write at H8 the total amount of tax withheld from payments to the company that were subject to foreign resident capital gains withholding in Australia.

    You should only claim at H8 a credit equal to the amount of foreign resident capital gains withholding paid by a purchaser to the ATO on your behalf. The ATO would have issued you with confirmation of this amount.

    Do not include credits for other foreign resident withholding at H8. Include these at H2 Credit for tax withheld – foreign resident withholding.

    I – Tax offset refunds (Remainder of refundable tax offsets)

    Write at I the remaining amount (if any) of refundable tax offsets from E. Include an amount at I even if it is zero (if zero write 0). Complete I as it is mandatory.

    If you have an excess amount of refundable tax offsets remaining from E that was not able to be offset against T3, you must write this amount at I.

    If the complete amount at E has been offset against T3, that is, there is no refundable tax offset amount remaining, you must write zero (0) at I.

    K – PAYG instalments raised

    Write at K the total of the company’s PAYG instalments for the income year of the tax return, whether or not the instalments have actually been paid.

    Include in K the total instalment amount either:

    • the amounts pre-printed at T7 on the company’s quarterly activity statements or at T5 on its annual instalment activity statement (if it used the instalment amounts worked out by us which it did not vary) or
    • the amounts the company reported at 5A on its activity statements, reduced by any credits it claimed at 5B (if it did not use the instalment amounts worked out by us).

    To ensure the company receives the correct amount of credit for its PAYG instalments, make sure all of its activity statements are lodged before its income tax return is lodged. Lodge any outstanding activity statements, even if the company has paid the instalments or had nothing to pay.

    The company is entitled to a credit for its PAYG instalments even if it has not actually paid a particular instalment. However, the company will be liable for the general interest charge on any outstanding instalment for the period from the due date for the instalment until the date it is fully paid.

    K is only to be used for the monthly, quarterly or annual instalments raised during the financial year. The amount recorded at K must not include ‘wash up’ or residual payments.

    Monthly instalments

    From 1 January 2014, the way you make PAYG instalments may have changed. If your adjusted base assessment instalment income exceeded the threshold of $1 billion, you will now be paying monthly rather than quarterly instalments.

    From 1 January 2015, taxpayers who exceed the threshold of $100 million will start paying monthly instalments. You will be notified of this change in writing.

    Taxpayers who exceed the threshold of $20 million will transition to monthly instalments by 1 January 2017.

    Consolidated or MEC groups

    After the head company of a consolidated group or MEC group lodges its first income tax return, we calculate a consolidated instalment rate for the group based on the head company’s income tax return. Once the head company of the consolidated group or MEC group obtains this consolidated instalment rate, the group is considered to be a mature group for PAYG instalment purposes (‘mature group’). The head company of a mature group will be the only entity in the group that will be liable to pay PAYG instalments for the group’s income year.

    The head company of a mature group is entitled to claim a credit in its income tax return for the PAYG instalments it was liable to pay for the income year.

    If the consolidated group or MEC group is a mature group for the entire income year, write at K the total amount of instalments payable by the head company of the consolidated group or MEC group for the income year.

    The period from the chosen date of consolidation though to the instalment period in which the head company matures is known as the 'formation period'. During the ‘formation period’, each member of the consolidated group or MEC group must continue to calculate their instalment income as if they were not members of the consolidated group or MEC group and each will continue to be individually liable for their PAYG instalments. In this instance, special rules apply in determining the amount of PAYG instalment credit that the head company of a consolidated group or MEC group is entitled to claim in its income tax return.

    When an entity (a ‘joining entity’) joins a mature group, the single entity rule ensures that the joining entity’s PAYG instalment obligations will generally cease from the beginning of the instalment period that starts after the date of joining. For more information, see Treatment of PAYG instalments in the Consolidation reference manual.

    When an entity (an 'exiting entity') leaves a mature group, it will be given the instalment rate that the head company had during the instalment period in which it exits the group and it will have to report and pay instalments from the exiting instalment period onwards. The single entity rule ensures that the exiting entity only has a liability for reporting instalment income from the date that it exits the consolidated group or MEC group.

    A joining entity may be required to lodge an income tax return for any non-membership periods during the income year in which it joins a consolidated group or MEC group. In the joining entity’s income tax return for its non-membership periods, write at K the total of instalments payable by it. This sum is the total of the amounts included at 5A of all activity statements for the joining entity’s non-membership periods.

    S – Amount due or refundable

    Write at S the balance of tax payable (+) or refundable (−).

    For the amount at S, add T5 and G, and then subtract HI and K.

    If the amount at S is positive, that amount is payable by you.

    If the amount at S is negative, that amount is refundable to you.

    The amount at S does not take into account any interim or voluntary payments the company has made against its income tax liability for the year of this return. If the company has made such payments, take these into account in calculating the company’s final payment, but do not show the amounts on this tax return.

    Send the company’s payment to the address on the pre-identified payment slip. If the company has not received one, see Payment.

    Do not send the company’s payment with the Company tax return 2020.

    Next step:

    Last modified: 09 Dec 2020QC 62685