INCOME TAX (TRANSITIONAL PROVISIONS) ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 205 - Franking accounts  

SECTION 205-70   Tax offset arising from franking deficit tax liabilities  

General application rule

205-70(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

205-70(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

205-70(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

205-70(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

205-70(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.

205-70(6)  


The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity:


(a) that arose under table item 1, 3, 5 or 6 in section 205-30 of the Income Tax Assessment Act 1997 for the relevant income year; and


(b) if the entity has franking debits covered by paragraph (a) for the relevant income year - that arose under table item 2 in that section of that Act for the relevant income year.

205-70(7)  


The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity.

205-70(8)  


A determination under subsection (7) is not a legislative instrument.



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