Senate

Taxation Laws Amendment Bill (No. 4) 1993

Supplementary Explanatory Memorandum

Amendments and requests for amendments to be moved by the Government

(Circulated by the authority of the Treasurer the Hon Ralph Willis, M.P.)

Chapter 2 Penalties for over-franking dividends

Overview

2.1 Division 7 of the Bill proposes amendments to the calculation of franking additional tax (FAT), which is the penalty for deliberate over-franking of dividends. As they stand the amendments will apply where an over-franked dividend is paid after 14 December 1993, the date of introduction of the Bill.

2.2 As a result of these amendments to the Bill, the proposed amendments contained in Division 7 will now apply where an over-franked dividend is declared after 14 December 1993 and also paid after that date.

2.3 Clause 51 contains the application provision for the Division 7 amendments. It is now proposed that clause 51 will operate in the following way:

·
The amendments contained in Division 7 will apply to FAT calculations for the franking year during which the Bill was introduced and for all later franking years.
·
In relation to the franking year during which the Bill was introduced, which is the 1993-94 franking year, the proposed amendments will only apply in cases where

-
the declaration in respect of an over-franked dividend was made after 14 December 1993; and
-
the dividend was paid after that date [Amendments 2 to 6] .

2.4 A declaration is required to be made under section 160AQF as to the extent to which a dividend is franked and is made on a day before the dividend is paid.

2.5 If an over-franked dividend is declared before 14 December 1993 and paid after that date the proposed amendments will not apply.


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