INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 7 - Private companies  

SECTION 105A   SUFFICIENT DISTRIBUTION  

105A(1)   [What amounts to a sufficient distribution]  

For the purposes of this Division, a private company shall be deemed to have made a sufficient distribution in relation to a year of income if it has, during the prescribed period, paid in dividends (other than special fund dividends and prescribed dividends) an amount not less than the excess of the distributable income of that year of income over the retention allowance in respect of that distributable income.

105A(2)   [Year of incorporation]  

In relation to the year of income in which a company was incorporated, being a year of income after the year of income that ended on 30 June 1951, dividends paid by the company during the first 10 months of the first-mentioned year of income (not being dividends taken into account in ascertaining whether the company made a sufficient distribution of its income of the second-mentioned year of income) shall be deemed to be paid during the prescribed period.

105A(3)   [Certain dividends not taken into account]  

A dividend paid by a company during the prescribed period in relation to a year of income shall not be taken into account for the purposes of subsection (1) if the dividend was paid in pursuance of an agreement under which a benefit was to be provided, or benefits were to be provided, whether before or after the time of payment of the dividend, to -


(a) the company;


(b) another person or other persons; or


(c) the company and another person or other persons,

and the Commissioner is satisfied that the value of the benefit, or the sum of the values of the benefits, as the case may be, was to be not less than, or not substantially less than, the amount of the dividend.

105A(3A)   [Dividend satisfied by issue of shares]  

Subsection (3) does not apply in relation to an amount, being the whole or a part of a dividend paid by a company after 20 January 1982, if -


(a) the payment of the dividend was satisfied, in whole or in part, by the issue of shares in, or debentures of, the company; and


(b) the Commissioner considers that it would be unreasonable for that subsection to apply in relation to that amount.

105A(4)   [Person includes trustee]  

A reference in paragraph (3)(a), (b) or (c) to a person or to a company shall be read as including a reference to a person or to a company, as the case may be, in the capacity of a trustee.

105A(4AA)   [Franked dividend paid on or after 1/7/87]  

A dividend paid by a company on or after 1 July 1987 shall not be taken into account in ascertaining whether a company is deemed to have made a sufficient distribution in relation to a year of income to the extent of the franked part of the dividend.

105A(4A)   [Agreement to provide benefit]  

For the purposes of subsection (3), an agreement shall be deemed to be an agreement under which a benefit is to be provided to a person if, and only if, the agreement is an agreement under which money is to be paid to, property transferred to or services provided for, a person for less than full consideration.

105A(4B)   [Interpretation]  

For the purposes of this section -


(a) an agreement under which a loan is to be made to a person on conditions including -


(i) a condition that the loan will be repayable on demand if a demand for repayment is made at or before a specified time, or at or before a time ascertained by reference to the happening of a specified event; and

(ii) a condition that, if a demand for repayment of the loan is not made at or before that time, repayment of the loan is to be postponed,
shall be deemed to be an agreement under which a payment of money of an amount equal to the amount of the loan is to be made, for no consideration, to the person to whom the loan is to be made;


(b) an agreement under which a person is to release or abandon, or to fail to demand repayment of, a debt owed by another person shall be deemed to be an agreement under which an amount of money equal to the amount of the debt is to be paid, for no consideration, to the person by whom the debt is owed; and


(c) an agreement under which -


(i) a dividend is to be credited to a person by a company; and

(ii) the payment of that dividend is, in whole or in part, to be satisfied by the issue to the person of any shares in, or debentures of, the company or by the transfer to the person of any property,
shall be deemed to be an agreement under which an amount of money equal to so much of the dividend as is to be so satisfied is to be paid to the company in respect of the issue of those shares or debentures or the transfer of that property, as the case may be.

105A(4C)   [Agreement to pay, etc, for shares]  

For the purposes of this section, an agreement under which money is to be paid, or property is to be transferred, to a person in respect of the issue or transfer of shares in, or debentures of, a company shall be deemed to be an agreement under which that money is to be paid, or that property is to be transferred, as the case may be, to that person for no consideration.

105A(4D)   [Value of ``benefit'']  

A reference in subsection (3) to the value of a benefit that is to be provided under an agreement shall be read as a reference to -


(a) in the case of a benefit that is to consist of a payment of money or a transfer of property - the amount by which, in the opinion of the Commissioner, the amount of money that is to be paid, or the value of the property that is to be transferred, as the case may be, exceeds the value of any consideration that is to be given for that payment or transfer, as the case may be; and


(b) in the case of a benefit that is to consist of the provision of services - the amount by which, in the opinion of the Commissioner, the value of the services that are to be provided exceeds the value of any consideration that is to be given for the provision of those services.

105A(4E)   [``Property'' defined]  

In the preceding provisions of this section, property includes a chose in action and also includes any estate, interest, right or power, whether at law or in equity, in or over property.

105A(5)   [Beneficial ownership of shares test]  

Notwithstanding subsection (1) but subject to the following provisions of this section and to sections 105AAA and 105AAB , an amount paid in a dividend by a private company during the first 2 months of the period that is the prescribed period in relation to the year of income (not being an amount paid on the day that is the first or last day of that period of 2 months) shall not be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income unless the company satisfies the Commissioner that, at all times during the part of that period of 2 months that followed the day on which that amount was paid, shares in the company carrying between them -


(a) the right to exercise more than one-half of the voting power in the company;


(b) the right to receive more than one-half of any dividends that may be paid by the company; and


(c) the right to receive more than one-half of any distribution of capital of the company,

were beneficially owned by persons who, at all times during the part of that period of 2 months that commenced on the first day of that period and ended on the day on which that amount was paid, beneficially owned shares in the company carrying between them rights of those kinds.

105A(6)   [Deemed continuity from declaration to payment of dividend]  

Where a company has, whether before or after the commencement of this subsection, declared a dividend in respect of shares in the company, a person who was the beneficial owner of any of those shares at the time when the dividend was declared shall be deemed, for the purposes of the application of subsection (5) or subsection (9) in relation to that dividend, to have continued to be the beneficial owner of those shares until the time when the dividend was paid.

105A(7)   [Dividend on first or last day]  

An amount paid in a dividend by a private company on the day that is the first or last day of the first 2 months of the period that is the prescribed period in relation to the year of income shall not be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income if -


(a) a change in the beneficial ownership of any shares in the company took place on that first or last day, as the case may be, of that period of 2 months;


(b) where the amount was paid in pursuance of a declaration of a dividend made before that first or last day, as the case may be, of that period of 2 months - a change in the beneficial ownership of any shares in the company took place after the declaration of the dividend and before that day; or


(c) on or before the last day of that period of 2 months an agreement was entered into, or a right, power or option (including a contingent right, power or option) was granted, that, in any way, directly or indirectly, related to shares in the company and the agreement was entered into, or the right, power or option was granted, for the purpose, or for purposes that included the purpose, of securing that an amount that was or might be paid in a dividend by the company during that period of 2 months would be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income.

105A(8)   [Circumstances for tracing interests]  

Where -


(a) subsection (5) would, but for this subsection, apply for the purpose of determining whether an amount paid in a dividend by a private company during the first 2 months of the period that is the prescribed period in relation to the year of income is to be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income;


(b) at any time during that first 2 months another company or other companies beneficially owned all or any of the shares in the first-mentioned company or an interest or interests in all or any of those shares; and


(c) the first-mentioned company requests the Commissioner at the time when it furnishes to him a return (or, if more than one return is furnished, the first return) of its income of the year of income, or within such further period as the Commissioner allows, that subsection (9) should apply for the purpose referred to in paragraph (a) or the Commissioner considers it reasonable that that subsection should apply for that purpose,

then subsection (9) applies for that purpose in lieu of subsection (5).

105A(9)   [Tracing of interests]  

Where, by virtue of subsection (8), this subsection applies for the purpose of determining whether an amount paid in a dividend by a private company (in this subsection referred to as the relevant company ) during the first 2 months of the period that is the prescribed period in relation to the year of income is to be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income, then, notwithstanding subsection (1) but subject to subsection (12) and to sections 105AAA and 105AAB , that amount shall not be so taken into account unless the Commissioner is satisfied, or considers that it is reasonable to assume, that -


(a) at all times during the part of that period of 2 months that followed the day on which that amount was paid, the voting power in the relevant company was, either directly or through one or more interposed companies, trustees or partnerships, controlled, or capable of being controlled, by a person not being a company, or by 2 or more persons not being companies, who, either directly or through one or more interposed companies, trustees or partnerships, controlled, or was or were capable of controlling, the voting power in the relevant company at all times during the part of that period of 2 months that commenced on the first day of that period and ended on the day on which that amount was paid;


(b) a person not being a company who had, or 2 or more persons not being companies who had between them, at all times during the part of that period of 2 months that followed the day on which that amount was paid a right to receive, directly or indirectly, for his or their own benefit more than one-half of any dividends that might be paid by the relevant company would, if the relevant company had paid a dividend at any time during the part of that period of 2 months that commenced on the first day of that period and ended on the day on which that amount was paid, have had, or have had between them, as the case may be, a right to receive, directly or indirectly, for his or their own benefit more than one-half of that dividend; and


(c) a person not being a company who had, or 2 or more persons not being companies who had between them, at all times during the part of that period of 2 months that followed the day on which that amount was paid a right to receive, directly or indirectly, for his or their own benefit more than one-half of any distribution of capital of the relevant company would, if the relevant company had made a distribution of capital at any time during the part of that period of 2 months that commenced on the first day of that period and ended on the day on which that amount was paid, have had, or have had between them, as the case may be, a right to receive, directly or indirectly, for his or their own benefit more than one-half of that distribution of capital.

105A(10)   [Deemed right to receive dividend, etc]  

For the purposes of this section, a person shall be deemed to be a person who had, or would have had, a right to receive indirectly for his own benefit the whole or a particular fraction of a dividend that might be, or might have been, paid by a company or of a distribution of capital of a company, or 2 or more persons shall be deemed to be persons who had, or would have had, between them a right to receive indirectly for their own benefit the whole or a particular fraction of such a dividend or distribution of capital, if, in the event of a payment of a dividend by the company, or of a distribution of capital of the company, the person or persons would, otherwise than as a shareholder or shareholders of the company or as a trustee or trustees, receive or have received the whole or that fraction, as the case may be, of that dividend, or of that distribution of capital, if there had been successive distributions of the relative parts of that dividend, or of that distribution of capital, to and by each of any companies or trustees interposed between the company paying the dividend, or making the distribution of capital, and that person or those persons.

105A(11)   [Section 80B tests to apply]  

Section 80B applies for the purposes of the application of subsection (5) or subsection (9) in determining whether an amount paid in a dividend by a private company during the first 2 months of the period that is the prescribed period in relation to the year of income is to be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income in like manner as that section applies for the purposes of the application of section 80A in determining whether a loss incurred by a company is to be taken into account in the 1996-97 year of income for the purposes of section 79E , 79F , 80 , 80AAA or 80AA but, for the purposes of section 80B as so applying -


(a) a reference in that section to the year in which the loss was incurred shall be read as a reference to the part of that period of 2 months that commenced on the first day of that period and ended on the day on which the amount was paid;


(b) a reference in that section to the year of income shall be read as a reference to the part of that period of 2 months that followed the day on which the amount was paid; and


(c) the reference in paragraph (5)(c) of that section to the purpose of enabling the company to take into account for the purposes of section 79E , 79F , 80 , 80AAA or 80AA a loss that the company had incurred, or might incur, shall be read as a reference to the purpose of securing that an amount that the company had paid, or might pay, in a dividend during that period of 2 months would be taken into account in ascertaining whether the company is deemed to have made a sufficient distribution in relation to the year of income.

105A(12)   [Commissioner's power to disregard subsec (5) to (11)]  

Subsections (5) to (11), inclusive, do not apply in relation to an amount paid in a dividend if the Commissioner considers that, having regard to the persons who were the beneficial owners of shares in the company at the time when the amount was paid, it would be unreasonable for those subsections to apply in relation to that amount.


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