ATO Interpretative Decision
ATO ID 2004/838 (Withdrawn)
Income Tax
Income Tax: Deferred company tax instalments and franking creditsFOI status: may be released
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This ATO Interpretative Decision is withdrawn from the database because "deferred company tax instalment arrangements" were only applicable to an entity's final 2000-01 instalment liability and not applicable to any instalment liabilities that arose after 30 June 2001.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Will corporate tax entities that pay deferred company tax instalments on or after 1 July 2002, record franking credits arising from these payments on a tax paid basis pursuant to section 205-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. Corporate tax entities that pay deferred company tax instalments on or after 1 July 2002 will record franking credits arising from these payments on a tax paid basis in their franking account from 1 July 2002.
Facts
A corporate tax entity makes two deferred company tax instalments of $2,000 each, on 30 September 2003 and 31 December 2003 respectively, in relation to the income year ending 30 June 2000. The corporate tax entity has been assessed for income tax in relation to that income year.
Reasons for Decision
Deferred company tax instalments are arrangements entered into by corporate tax entities to pay, in instalments, the tax liability for the income year ending 30 June 2000. The corporate tax rate for the income year ending 30 June 2000 was 36%. Some of these arrangements will continue until the income year ending 30 June 2006.
Where a corporate tax entity makes a deferred company tax instalment after 1 July 2002, it will record the franking credits attributed to this payment in its franking account on a tax paid basis. This is in accordance with subsection 205-5(2) of the ITAA 1997.
An entity which pays a deferred company tax instalment satisfies the definition of 'pays income tax' in subsection 205-20(3) of the ITAA 1997. The entity has a liability to pay income tax for the 2000 income year. The payment of a deferred company tax instalment generates an entitlement to a credit under section 221AZM of the Income Tax Assessment Act 1936, which is applied to reduce that liability to pay income tax. Pursuant to Item 2 of section 205-15 of the ITAA 1997, a franking credit equal to that part of the payment that is attributable to the period during which the entity was a franking entity arises on the day on which the payment is made.
Based upon the facts in this case, the entity will enter a $2,000 credit in the franking account on 30 September 2003 and a further credit of the same amount on 31 December 2003.
Date of decision: 14 October 2004Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1997
subsection 205-5(2)
section 205-15
subsection 205-20(3)
section 221AZM
Keywords
Company tax
Company tax instalment credits
Franking accounts
Franking credits
Imputation system
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 14 October 2004 | Original statement |
| You are here | 14 October 2004 | Archived |