Income Tax Assessment Act 1997
This section has effect if:
(a) a company has made an *NZ franking choice; and
(b) the choice is revoked or cancelled at a time (the end time ); and
(c) immediately before the end time the company is a foreign resident.
A *franking debit arises in the company ' s *franking account on the day during which the end time occurs if the account was in *surplus immediately before that time. The amount of the debit equals the *franking surplus. Franking deficit tax if franking deficit just before end time 220-215(3)
If the company ' s *franking account was in *deficit immediately before the end time, subsection 205-45(3) applies in relation to the company as if it ceased to be a *franking entity at the end time.
Subsection 205-45(3) makes an entity liable to pay franking deficit tax if the entity ceases to be a franking entity and had a franking deficit immediately before ceasing to be a franking entity.220-215(4)
Subsection (3) does not limit the effect of subsection 205-45(3) . Take account of franking debit arising under section 220-605 220-215(5)
Take account of any *franking debit arising under section 220-605 because of the revocation or cancellation in working out for the purposes of this section whether the company ' s *franking account is in *surplus or *deficit immediately before the end time.
Section 220-605 provides for a franking debit to arise in the company ' s franking account immediately before the end time if, immediately before the end time, the company was a former exempting entity and its exempting account was in deficit.