Taxation Laws Amendment Act (No. 8) 2003 (107 of 2003)
Schedule 7 Tax offset arising from franking deficit tax liability
Part 2 Amendment of the Income Tax (Transitional Provisions) Act 1997
10 At the end of Division 205
Add:
[The next section is section 205-70.]
205-70 Tax offset arising from franking deficit tax liabilities
General application rule
(1) Section 205-70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity's assessments for the 2002-2003 income year and later income years, except as provided in the following subsections.
Late balancing entities - 2001-2002 income year
(2) If a corporate tax entity's 2001-2002 income year ends after 30 June 2002, section 205-70 of the Income Tax Assessment Act 1997 has effect in relation to the entity's assessment for that income year as if the following method statement had replaced the method statement in that section.
Method statement
Step 1. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(a).
Step 2. Add to the step 1 result the excess that is covered by paragraph (1)(c).
The result is the *tax offset to which the entity is entitled under this section for the relevant year.
Late balancing entities - 2002-2003 income year
(3) If:
(a) a corporate tax entity's 2002-2003 income year ends after 30 June 2003; and
(b) the entity makes a valid election under section 205-20 in that income year;
section 205-70 of the Income Tax Assessment Act 1997 has effect in relation to the entity's assessment for that income year as if the following method statement had replaced the method statement in that section.
Method statement
Step 1. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003.
Step 2. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003.
Then reduce it by 30% if it exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account during the period of 12 months immediately preceding that date.
Step 3. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003.
Then reduce it by 30% if it exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year.
Step 4. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001-2002 income year.
Step 5. Work out the excess that is covered by paragraph (1)(c).
Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the *tax offset to which the entity is entitled under this section for the relevant year.
Late balancing entities - later income years
(4) If:
(a) an income year of a corporate tax entity ends after 30 June 2004; and
(b) the entity makes a valid election under section 205-20 in that income year;
section 205-70 of the Income Tax Assessment Act 1997 has effect in relation to the entity's assessment for that income year as if the following method statement had replaced the method statement in that section.
Method statement
Step 1. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year.
Then reduce it by 30% if it exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account during the period of 12 months immediately preceding that 30 June.
Step 2. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year.
Then reduce it by 30% if it exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year.
Step 3. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year.
Then reduce it by 30% if it exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account during the period of 12 months immediately preceding that 30 June.
Step 4. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year.
Then reduce it by 30% if it exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year.
Step 5. Add up the results of steps 3 and 4 for all the previous income years covered by paragraph (1)(b).
Step 6. Work out the excess that is covered by paragraph (1)(c).
Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the *tax offset to which the entity is entitled under this section for the relevant year.
Application of the 30% reduction rule
(5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in:
(a) subsection (3) or (4); or
(b) section 205-70 of the Income Tax Assessment Act 1997;
that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement.
205-75 Working out the tax offset for the first income year
First income year and relevant liabilities
(1) This section applies to a corporate tax entity in relation to:
(a) this income year of the entity (the first income year ):
(i) the 2001-2002 income year if subsection 205-70(2) applies to the entity; or
(ii) the 2002-2003 income year if subsection 205-70(2) does not apply to the entity; and
(b) amounts of liabilities incurred by the entity (the relevant liabilities ) that:
(i) are covered by paragraph (1)(a) of section 160AQK or of 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and
(ii) have not been applied under that Act to reduce the entity's income tax liabilities for an earlier income year.
Relevant liabilities carried forward to the first income year
(2) Section 205-70 of the Income Tax Assessment Act 1997 has effect in relation to the entity as if:
(a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and
(b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section.
(3) Subsection (2) has effect only for the purposes of working out:
(a) whether or not the entity is entitled to a tax offset under section 205-70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and
(b) the amount of that tax offset.
205-80 Application of Subdivision C of Division 5 of the Income Tax Assessment Act 1936
(1) This section applies if Subdivision C of Division 5 of the Income Tax Assessment Act 1936 would, apart from section 160AOAA of that Act, apply in relation to an entity's assessment for a year of income that ends before 1 July 2002.
(2) Section 160AOAA of that Act does not prevent:
(a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity's income tax liability for that year of income; and
(b) the operation of any provision in that Subdivision in relation to that determination.
(3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205-70 of the Income Tax Assessment Act 1997 must be disregarded.