Supplementary Explanatory Memorandum
Amendments to be moved on behalf of the Government (Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 2 - Franking of dividends
Overview
2.1 Amendment 2 will amend Schedule 3 to this Bill to ensure that no taxpayer is disadvantaged by the retrospective amendment to be made by item 2 in Schedule 3 to the existing concession under the 45 day rule which applies where shares or interests in shares are transferred to a bare trustee.
Background
2.2 The 45 day rule requires a shareholder to hold shares for at least 45 days at risk to be eligible for franking benefits or the inter-corporate dividend rebate for dividends paid on shares. A concession applies under the 45 day rule where a person transfers shares or an interest in shares to a bare trust so that the person is not precluded by the transfer from satisfying the 45 day rule. The concession is provided in subsections 160APHH(6) and (7) of the Income Tax Assessment Act 1936 (ITAA 1936).
2.3 Item 2 in Schedule 3 will substitute an alternative concession to apply in these circumstances. The substituted concession will reduce compliance costs for custodians and nominees. The proposed amendment is retrospective and will apply from the commencement of the 45 day rule. This change, including the date of effect, was requested by representatives of the custodians and nominees industry. However, some taxpayers may have derived an advantage from the concession in its present form, which they would prefer to retain.
Date of effect
2.4 This change will apply from the commencement of the 45 day rule.