Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 713 - Rules for particular kinds of entities  

Subdivision 713-L - Life insurance companies  

Imputation rules for life insurance companies joining consolidated group

SECTION 713-545   Treatment of franking surplus in franking account of life insurance subsidiary joining group  

713-545(1)    
This section applies if:

(a) a ^* life insurance company becomes a ^* member of a ^* consolidated group at a time (the joining time ); and

(b) at the joining time, the life insurance company owns, either directly or indirectly through one or more interposed entities, ^* membership interests in yet another entity (the life insurance subsidiary ) that becomes a ^* subsidiary member of the group at that time; and

(c) the life insurance subsidiary ' s ^* franking account is in surplus just before the joining time.

713-545(2)    
Paragraph 709-60(2)(b) does not apply in relation to the life insurance subsidiary.

713-545(3)    
A ^* franking credit arises at the joining time in the ^* franking account of the ^* head company of the group. The amount of the credit is the amount worked out under subsection (4).

713-545(4)    
The amount is equal to the amount of the ^* franking credit that would arise in the ^* life insurance company ' s ^* franking account just before the joining time under item 5 of the table in subsection 219-15(2) if:

(a) the life insurance subsidiary made a ^* franked distribution to the life insurance company just before the joining time; and

(b) the amount of the franking credit on the distribution were equal to the surplus mentioned in paragraph (1)(c).

713-545(5)    
The ^* head company of the group is entitled to a ^* tax offset for the income year in which the joining time occurs. The amount of the tax offset is:

(a) if all the ^* membership interests (if any) that the ^* life insurance company owns directly in the life insurance subsidiary, and all the membership interests (if any) that the life insurance company owns directly in interposed entities, are ^* segregated exempt assets of the life insurance company - the surplus mentioned in paragraph (1)(c), reduced by the amount worked out under subsection (4); or

(b) if all the membership interests (if any) that the life insurance company owns directly in the life insurance subsidiary, and all the membership interests (if any) that the life insurance company owns directly in interposed entities, are ^* complying superannuation assets of the life insurance company - the amount worked out under subsection (6); or

(c) otherwise - nil.

713-545(6)    

The amount is worked out using the following formula (or is nil if it would otherwise be negative):

where:

complying superannuation class tax rate
means the rate of tax in respect of the *complying superannuation class of the taxable income of a *life insurance company for the income year in which the joining time occurs (see paragraph 23A(b) of the Income Tax Rates Act 1986 ).

ordinary class tax rate
means the rate of tax in respect of the ^* ordinary class of the taxable income of a life insurance company for the income year in which the joining time occurs (see paragraph 23A(a) of the Income Tax Rates Act 1986 ).