paid to shareholder
by company out of
profits derived
paid in
money or
other
property
Tainted share
capital account
s197
where company
capitalises profits
and transfers of
other amounts
other than capital
assessable
under s44
(1B)
paid means
credited s6(1)
ITAA 36
dividend still
paid if it is
credited and
irrevocable
CS: Brookton
Cooperative society
ltd v FCT
all non-share dividends
paid to shareholder by the
company
paid to holders from non
share equity interest
s974-115 & s974-120
dividends subject to
withholding tax and
franked dividends that
are exempted from
withholding tax are
NANE s128D ITAA36
deemed dividends for
private companies =>
unfrankable under s202
ITAA 97
excessive salaries s109 (1)
Deemed dividend
to the shareholder
Not
Deductible to
the company
Payments s109(C)
Payments made to
shareholders (or associates)
are treated as deemed
dividends
exclusions
payment to
discharge arm's
length debt: s109J
Payment to
corporate
shareholder:
s109k
Loans to shareholders s109D
Loans made to shareholders (or
associates) that are not repaid by earlier of
"lodgement date (oct 31)" or due date
exclusions
loans made to
a corporate
shareholder
s109k
Loans
meeting
minimum
criteria s109N
written loan agreement
commercial interest rate
term of loan
Loans made in the
ordinary course of biz
s109M
Forgiven debts paid to shareholders s109F
debts owed by shareholders
of private companies that are
forgiven
exclusions s109G
debts owed by
another company
forgiven due to
bankruptcy of
shareholder
liquidator distributions
treated as deemed
dividends s47(1)
ITAA36
CGT event C2 when
shares are redeemed
Capital gains taxable
under s47
imputation system
can frank dividends only if
it is a resident "franking
entity" and distribution is
a frankable distribution
s202-5 ITAA 97
maximum franking
credits that can be
attached to a
distribution is
determined by the
formula s202-60(2)
frankable
distribution *
(30% / ( 1- 30%))
must give
shareholders a
distribution
statement which
states the % of the
distribution s202-75
& s202-80 ITAA97
corporate tax
entities must keep
franking accounts
s205-10
Franking debits s205-30
franking a distribution
receiving an income tax refund
violating the
benchmark rule due to
underfranking
benchmark
rule ensures
that franking is
given equally to
all s203-15
must frank
using same
% s203-25
underfranks:
debit
s203-50(1)(b)
overfranks:
pay-over
franking tax
s203-50(1)
commissioner
may permit
different
s203-55
period for private
company is income
year s203-45
period for
public
company is
first 6 months
+ next 6
months in
year s203-40
(if exceed
>10%
excessive
s205-70(2)
reduces tax
offset by
30%
Franking credits s205-15
paying income tax or PAYG
received a franked distribution
incurring a liability to
pay franking deficit
tax
franking deficit tax
payable if the
franking account is
in deficit at the end
of income year s205-45(2)
can offset
against income
liability s205-70(1)
ITAA 97
when shareholder
receives a franked
distribution
need to gross up its
assessable income
by the franking
credit s207-20(1)
entitled to claim a
tax offset by the
same gross up
amount s207-20(2)
resident
individuals
franking offset
is refundable if
it exceeds
income tax
payable
resident
corporate
shareholders
franking credit tax
offset is not
refundable for
shareholders who
are corporate tax
entities
excess franking offsets can
be converted into a tax loss
which can be carried forward
to future income years if
current year is a loss s36-55
excess franking
offset / 30% = tax
loss carried
forward
resident
partnerships
and trusts
entitled to
their share of
franking credit
s207-45
non-resident
shareholders
s207-35
not
available
s207-20
treated as
NANE
s128D
withholding
tax applies
if fully franked dividends flow
indirectly through a
partnership/trust can have
specific deduction of franking
credit s207-95
qualified person
when hold shares
for at least 45 days
(90 days for
preference shares)
s160APHO ITAA36
if not
qualified,
not
entitled
to tax
offset
Treatment of losses (deductions
> assessable income and net
exempt income) applies to
unrealised net losses
Continuity of
ownership test
s165-12 (looking at
ultimate owners ie.
have control)
>50% of the voting
power in the
company
rights to >50% of
the company's
dividends
rights to >50% of
the company's
capital
distributions
test period is from
start of loss year to
end of the current
year s165-12(1)
anti
avoidance
provisions
same share
same person
s165-165
change of
control over
voting power
s165-15
same business
test s165-13(10)
ITAA97
carries on the same
business as it carried on
immediately before
"test time"
same business means
identical business
CS: Avondale Motors
(parts) pty ltd v FCT
same business even
though changed
name
AGC (advances)
Ltd v FCT
it does not derive any
assessable income from a
new kind of business or a
new kind of transaction that
it did not carry on or enter
into before "test time"
test time is when
company fails the
COT
unrealised net losses
disallow up to amount of
unrealised net loss s165-115B
individual
asset method:
calculate each
CGT asset gain
or loss
global method:
market valuation of
all CGT assets worth
total cost base of
those assets
Consolidation
objectives of
consolidation
s700-10
prevent double taxation of the same
economic gain
prevent duplication of the same
economic loss
reduce compliance costs and improve
business efficiency
resident company can form
a consolidated group with
all wholly-owned
subsidiaries s703-10
irrevocable s703-50
head company s703-15(2) item 1
australian resident company
subject to corporate tax rate
not a member of another consolidated group
must own all beneficially membership interest s703-30
s703-15(2) item 2
subsidiary can be company, partnership or trust
australian resident
wholly owned subsidiary of the head company based on financial interest
implications
single entity rule s701-1
1 single tax return
subsidiaries treated as divisions
assets of subsidiaries are deemed to be held directly by head
intra group transactions are ignored
entry and exit history
entry history rule: head
company inherits tax
attributes everything that
happened before it became
a subsidiary is taken to have
happened to the head
company s701-5
exit history rule: subsidiary
inherits the relevant tax
attributes from the head
company s701-40
liability to tax
primary obligation to pay the
consolidated group's tax
liability rest with the head
company
joint and
several liability
for subsidiary
members
s721-15
subsidiary will be liable
even if it taken for part of
period to which liability
relates s721-10(1)
pre-consolidation losses
subsidiary losses can be transferred to
head company if modified COT and SBT
(year which the company has been
bought) tests are satisfied s707-120
pre-consolidation losses utilised by
head company = (market value of
subsidiary / market value of group) *
head co's taxable income for the
year
available fraction
is market value of
the subsidiary at
the time of the loss
transfer s707-320
tax cost setting rules
subsidiary joins the group s701-10
allocation of the head
company's acquisition costs of
the membership interests in the
subsidiary to the underlying
assets
reset cost base of assets
subsidiary leaves the group s701-15
reconstitute cost base of the membership interests