Supplementary Explanatory Memorandum
Chapter 2 Penalties for over-franking dividends
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.