INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIAA - FRANKING OF DIVIDENDS  

Division 4 - Required franking amount  

SECTION 160AQE   HOW TO WORK OUT THE REQUIRED FRANKING AMOUNT  

160AQE(1)   [Amount of required franking amount]  

For the purposes of this Part, the required franking amount for a dividend (in this section called the ``current dividend'' ) paid during a franking year (in this section called the ``current franking year'' ) to a shareholder in a company is so much of the dividend as does not exceed:


(a) if only one provisional required franking amount applies under the following provisions of this section - that provisional required franking amount; or


(b) in any other case - the greater or greatest of the provisional required franking amounts applicable under the following provisions of this section (whether or not 2 such amounts are applicable under the same subsection).

160AQE(2)   [Formula: provisional required franking amount]  

The amount calculated in accordance with the following formula is a provisional required franking amount:

Graphic

where:

CD is the amount of the current dividend;

CFD is the number of dollars in the total amount of the committed future dividends of the company at the beginning of the reckoning day for the current dividend (other than dividends included in component TD );

RFS is the number of dollars in the amount of the franking surplus of the company at the beginning of the reckoning day for the current dividend being that franking surplus reduced, for each frankable dividend (in this definition called an ``earlier dividend'' ) payable to a shareholder in the company that:

  • (a) has a reckoning day earlier than the reckoning day for the current dividend; and
  • (b) has not been paid before the reckoning day for the current dividend;
  • by the greater of:

  • (c) the amount that will be the franked amount of the earlier dividend; or
  • (d) the required franking amount for the earlier dividend;
  • SDD is the number of dollars in the total amount of frankable dividends that:

  • (a) are paid or payable to shareholders in the company; and
  • (b) have the same reckoning day as the current dividend;
  • (other than dividends included in component CFD or component TD );

    TD is:

  • (a) if the current dividend is paid under a resolution - the total amount of the frankable dividends paid or payable under the resolution to shareholders in the company; or
  • (b) in any other case - the amount of the current dividend;
  • LD is:

  • (a) if:
  • (i) another company proposes to pay one or more dividends ( ``proposed linked dividends'' ), where the payment of those dividends will:
  • (A) result in one or more franking debits of the first-mentioned company arising under subsection 160AQCB(3) (which deals with dividend streaming); and
  • (B) take place at a time when the other company is not a resident; and
  • (ii) the current dividend will be:
  • (A) one of the substituted dividends mentioned in that subsection in its application to the proposed linked dividends; and
  • (B) paid on or after the date of commencement of this paragraph;
  •  
    the total amount of the proposed linked dividends; or
  • (b) in any other case - 0; and
  • SD is:

  • (a) if:
  • (i) the current dividend will:
  • (A) result in a franking debit of the first-mentioned company arising under subsection 160AQCB(4) or (4A) (which deal with dividend streaming); and
  • (B) be one of the scheme dividends mentioned in that subsection; and
  • (C) be paid on or after the date of commencement of this paragraph; and
  • (ii) another company has paid, pays, or proposes to pay, one or more dividends ( ``eligible substituted dividends'' ), where those dividends:
  • (A) are covered by the substituted dividends mentioned in that subsection in its application to those scheme dividends; and
  • (B) were paid, are paid, or are proposed to be paid, at a time when the other company was not, is not, or will not be, a resident, as the case requires;
  •  
    the total amount of the eligible substituted dividends; or
  • (b) in any other case - 0.
  • 160AQE(3)   [Franked amount exceeding required franked amount]  

    Where:


    (a) a franked dividend having a reckoning day earlier in the franking year than the reckoning day for the current dividend has been paid to a shareholder in the company;


    (b) the franked amount of that earlier franked dividend exceeded the required franking amount for that earlier franked dividend; and


    (c) at the beginning of that earlier reckoning day, the current dividend was a committed future dividend;

    the amount calculated in accordance with the following formula is a provisional required franking amount:


    CD   × EFA
    EFD

    where:

    CD is the amount of the current dividend;

    EFA is the number of dollars in the franked amount of the earlier franked dividend; and

    EFD is the number of dollars in the amount of the earlier franked dividend.

    160AQE(4)   [Dividends with same reckoning day]  

    Where:


    (a) a franked dividend other than the current dividend is paid on the reckoning day for the current dividend;


    (b) the other dividend and the current dividend are not paid under the same resolution;


    (c) the reckoning day for the other dividend is the same as the reckoning day for the current dividend; and


    (d) the required franking amount for that other franked dividend, calculated without regard to this subsection, is less than the franked amount of that other franked dividend;

    the amount calculated in accordance with the following formula is a provisional required franking amount:


    CD   × OFA
    OFD

    where:

    CD is the amount of the current dividend;

    OFA is the number of dollars in the franked amount of the other dividend; and

    OFD is the number of dollars in the amount of the other dividend.

    160AQE(5)   [Deemed off-market purchase]  

    In calculating a provisional required franking amount, each on-market purchase of a share by a company is taken to be an off-market purchase.

    160AQE(6)   [Definition]  

    In this section:

    "franking surplus"
    , in relation to a company at a particular time, means the sum of:


    (a) the class A franking surplus (if any) of the company as at that time; and


    (b) the class B franking surplus (if any) of the company as at that time; and


    (c) the class C franking surplus (if any) of the company as at that time.


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