45BSchemes to provide certain benefits

45B  Schemes to provide certain benefits Purpose of section  (1) The purpose of this section is to ensure that relevant amounts are treated as dividends for taxation purposes if:  (a) components of a demerger allocation as between capital and profit do not reflect the circumstances of a demerger; or  (b) certain payments, allocations and distributions are made in substitution for dividends.  (2) This section applies if:  (a) there is a scheme under which a person is provided with a demerger benefit or a capital benefit by a company; and  (b) under the scheme, a taxpayer (the relevant taxpayer), who may or may not be the person provided with the demerger benefit or the capital benefit, obtains a tax benefit; and  (c) having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling a taxpayer (the relevant taxpayer) to obtain a tax benefit. Commissioner to determine that section 45BA or 45C applies  (3) The Commissioner may make, in writing, a determination that:  (a) section 45BA applies in relation to the whole, or a part, of the demerger benefit; or  (b) section 45C applies in relation to the whole, or a part, of the capital benefit. A determination does not form part of an assessment. Note: If section 45BA applies in relation to the whole, or a part, of a demerger benefit, this benefit may be a capital benefit. Meaning of provided with a demerger benefit  (4) A person is provided with a demerger benefit if in relation to a demerger:  (a) a company provides the person with ownership interests in that or another company; or  (b) something is done in relation to an ownership interest owned by the person that has the effect of increasing the value of an ownership interest (which may or may not be the same ownership interest) owned by the person. Meaning of provided with a capital benefit  (5) A reference to a person being provided with a capital benefit is a reference to any of the following:  (a) the provision of ownership interests in a company to the person;  (b) the distribution to the person of share capital or share premium;  (c) something that is done in relation to an ownership interest that has the effect of increasing the value of an ownership interest (which may or may not be the same interest) that is held by the person.  (6) However, a person is not provided with a capital benefit to the extent that the provision of interests, the distribution or the thing done referred to in subsection (5) involves the person receiving a demerger dividend.  (7) For the purposes of this section, a non‑share distribution to an equity holder is taken to be the distribution to the equity holder of share capital to the extent to which it is a non‑share capital return. Meaning of relevant circumstances of scheme  (8) The relevant circumstances of a scheme include the following:  (a) the extent to which the demerger benefit or capital benefit is attributable to capital or the extent to which the demerger benefit or capital benefit is attributable to profits (realised and unrealised) of the company or of an associate (within the meaning in section 318) of the company;  (b) the pattern of distributions of dividends, bonus shares and returns of capital or share premium by the company or by an associate (within the meaning in section 318) of the company;  (c) whether the relevant taxpayer has capital losses that, apart from the scheme, would be unutilised (within the meaning of the Income Tax Assessment Act 1997) at the end of the relevant year of income;  (d) whether some or all of the ownership interests in the company or in an associate (within the meaning in section 318) of the company held by the relevant taxpayer were acquired, or are taken to have been acquired, by the relevant taxpayer before 20 September 1985;  (e) whether the relevant taxpayer is a non‑resident;  (f) whether the cost base (for the purposes of the Income Tax Assessment Act 1997) of the relevant ownership interest is not substantially less than the value of the applicable demerger benefit or capital benefit;  (h) if the scheme involves the distribution of share capital or share premium—whether the interest held by the relevant taxpayer after the distribution is the same as the interest would have been if an equivalent dividend had been paid instead of the distribution of share capital or share premium;  (i) if the scheme involves the provision of ownership interests and the later disposal of those interests, or an increase in the value of ownership interests and the later disposal of those interests:  (i) the period for which the ownership interests are held by the holder of the interests; and  (ii) when the arrangement for the disposal of the ownership interests was entered into;  (j) for a demerger only:  (i) whether the profits of the demerging entity and demerged entity are attributable to transactions between the entity and an associate (within the meaning in section 318) of the entity; and  (ii) whether the assets of the demerging entity and demerged entity were acquired under transactions between the entity and an associate (within the meaning in section 318) of the entity;  (k) any of the matters referred to in subsection 177D(2). Meaning of obtaining a tax benefit  (9) A relevant taxpayer obtains a tax benefit if an amount of tax payable, or any other amount payable under this Act, by the relevant taxpayer would, apart from this section, be less than the amount that would have been payable, or would be payable at a later time than it would have been payable, if the demerger benefit had been an assessable dividend or the capital benefit had been an assessable dividend.  (10) In this section: scheme has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997. 45BA  Effect of determinations under section 45B for demerger benefits  (1) If the Commissioner makes a determination under subsection 45B(3), the amount of the demerger benefit, or the part of the benefit, is taken not to be a demerger dividend for the purposes of this Act for the owner of the ownership interest or the relevant taxpayer at the time when the owner or relevant taxpayer is provided with the demerger benefit.  (2) The amount of the demerger benefit is:  (a) if the benefit is the provision of an ownership interest—the market value of the interest at the time that it is provided; or  (b) if the benefit is an increase in the value of an ownership interest—the increase in the market value of the interest as a result of the change; or  (c) if the benefit is a distribution to the shareholder of share capital or share premium—the amount debited to the share capital account or share premium account of the company in connection with the provision of the benefit. 45C  Effect of determinations under sections 45A and 45B for capital benefits  (1) If the Commissioner makes a determination under subsection 45A(2) or 45B(3), the amount of the capital benefit, or the part of the benefit, is taken, for the purposes of this Act, to be an unfranked dividend that is paid by the company to the shareholder or relevant taxpayer at the time that the shareholder or relevant taxpayer is provided with the capital benefit.  (2) The dividend is taken to have been paid out of profits of the company.  (3) If the Commissioner has made a determination under section 45B in respect of the whole or a part of a capital benefit and the Commissioner makes a further written determination that the capital benefit, or the part of the capital benefit, was paid under a scheme for which a purpose, other than an incidental purpose, was to avoid franking debits arising in relation to the distribution from the company:  (a) on the day on which notice of the determination is served in writing on the company, a franking debit of the company arises in respect of the capital benefit; and  (b) the amount of the franking debit is the amount that, if the company had:  (i) paid a dividend of an amount equal to the amount of the capital benefit, or the part of the capital benefit, at the time when it was provided; and  (ii) fully franked the dividend;   would have been the amount of the franking credit of the company that would have arisen as a result of the dividend.  (4) The amount of the capital benefit is:  (a) if the benefit is the provision of an ownership interest—the market value of the interest at the time that it is provided; or  (b) if the benefit is an increase in the market value of an ownership interest—the increase in the market value of the interest as a result of the change; or  (c) if the benefit is a distribution to the shareholder of share capital or share premium—the amount debited to the share capital account or share premium account of the company in connection with the provision of the benefit.  (4A) For the purposes of this section:  (a) a non‑share distribution to an equity holder is taken to be the distribution to the equity holder of share capital to the extent to which it is a non‑share capital return; and  (b) the debit to the company’s non‑share capital account, in respect of the non‑share distribution, is taken to be a debit to the company’s share capital account. 45D  Determinations under sections 45A, 45B and 45C Notice by Commissioner of determination  (1) If the Commissioner makes a determination under section 45A, 45B or 45C, the Commissioner must give a copy of the determination to the company concerned (which, in the case of a demerger benefit referred to in section 45B, is the head entity of the demerger group). Notice by company of determination  (1A) That company must, in the case of a determination under section 45A or 45B, give a copy of the notice to:  (a) the advantaged shareholder referred to in section 45A; or  (b) the relevant taxpayer referred to in section 45B. Publication of determination in relation to listed public company  (2) If the Commissioner makes a determination under section 45A, in respect of a dividend paid by a listed public company, the Commissioner is taken to have served notice in writing of the determination on the advantaged shareholder if the Commissioner causes the notice to be published in a manner that results in the notice being accessible to the public and reasonably prominent. The notice is taken to have been served on the day on which the publication takes place. Evidence of determination  (3) The production of:  (a) a notice of a determination; or  (b) a document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of a determination; is conclusive evidence of:  (c) the due making of the determination; and  (d) except in proceedings under Part IVC of the Taxation Administration Act 1953 on an appeal or review relating to the determination, that the determination is correct. Objections  (4) If a taxpayer to whom a determination relates is dissatisfied with the determination, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953. 46FA  Deduction for dividends on‑paid to non‑resident owner Allowable deduction  (1) An amount is allowable as a deduction from the assessable income of a company (the resident company) if:  (a) the resident company is paid a dividend (the original dividend) that:  (i) is paid by a company that is a resident; and  (ii) is a non‑portfolio dividend; and  (iii) is not a fully‑franked dividend; and  (b) the resident company is not a group company in relation to the company that paid the original dividend in relation to the year of income in which the dividend is paid; and  (ba) neither the resident company, nor the company that pays the dividend, is a prescribed dual resident; and  (c) ignoring the amendments made by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006, but for subsection 46AB(1) or 46AC(2) or subparagraph 46F(2)(a)(i) of this Act as in force just before the commencement of those amendments, the resident company would have been entitled to a rebate under section 46 of this Act as so in force in respect of the unfranked amount of the original dividend; and  (d) the resident company pays a dividend (the flow‑on dividend) to a company that is not a resident (the non‑resident company); and  (e) the flow‑on dividend is not a fully‑franked dividend; and  (f) the resident company declares that the unfranked amount of the flow‑on dividend is an on‑payment of the unfranked amount of the original dividend to the extent of a specified percentage (not exceeding 100%); and  (g) when the original dividend is paid, when the declaration is made and when the flow‑on dividend is paid, the resident company is:  (i) a resident; and  (ii) wholly owned by the non‑resident company. The deduction is from assessable income of the year of income in which the flow‑on dividend is paid. The amount of the deduction is equal to the flow‑on amount worked out using subsection (2).  (2) The flow‑on amount is:    Flow‑on declarations  (3) The declaration under paragraph (1)(f) (the flow‑on declaration) must be made:  (a) in writing; and  (b) before the flow‑on dividend is paid. The declaration cannot be revoked or varied.  (4) The flow‑on declaration is effective only to the extent to which the flow‑on amount does not exceed the surplus in the resident company’s unfranked non‑portfolio dividend account immediately before the declaration is made. Note: See section 46FB for the unfranked non‑portfolio dividend account. Unfranked amount of flow‑on dividend unfrankable  (5) Part 3‑6 of the Income Tax Assessment Act 1997 (the imputation system) applies to the unfranked amount of the flow‑on dividend as if it were an unfrankable distribution within the meaning of section 202‑45 of that Act if a deduction is allowed to the resident company in relation to the flow‑on dividend. Wholly owned by non‑resident company  (6) The resident company is wholly owned by the non‑resident company if all the shares in the resident company are held by and beneficially owned by the non‑resident company.  (7) However, the company is not wholly owned by the non‑resident company if a person is in a position to affect rights, in relation to the resident company, of the non‑resident company.  (8) The resident company is also not wholly owned by the non‑resident company if at some future time a person will be in a position to affect rights as described in subsection (7). A person in a position to affect rights  (9) A person is in a position to affect rights of a company in relation to another company if the person has a right, power or option:  (a) to acquire those rights from one or other of those companies; or  (b) to do something that would prevent one or other of those companies from exercising its rights for its own benefit, or from receiving any benefit arising from having those rights.  (10) It does not matter whether the person has the right, power or option because of the constitution of one or other of those companies, any agreement or otherwise. fully‑franked dividend means a dividend whose franking percentage (within the meaning of section 203‑35 of the Income Tax Assessment Act 1997) is 100%. group company has the same meaning as in former section 160AFE as in force immediately before 1 July 2002. non‑portfolio dividend has the same meaning as in section 317. non‑resident company means a company that is not a resident. unfranked amount of a dividend (including an unfrankable distribution within the meaning of section 202‑45 of the Income Tax Assessment Act 1997) means the amount of the dividend less the franked part. 46FB  Unfranked non‑portfolio dividend account Company may establish account  (1) A company may establish an unfranked non‑portfolio dividend account. Account surplus  (2) An unfranked non‑portfolio dividend account surplus exists for a company at a particular time if the company’s total unfranked non‑portfolio dividend credits arising before that time exceed its total unfranked non‑portfolio dividend debits arising before that time.  (3) The amount of the surplus is equal to the amount of the excess. Credits  (4) An unfranked non‑portfolio dividend credit arises for a company if:  (a) the company is paid an unfranked non‑portfolio dividend; and  (b) the company is not a group company in relation to the company that paid the dividend in relation to the year of income in which the dividend is paid; and  (c) ignoring the amendments made by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006, but for subsection 46AB(1) or 46AC(2) or subparagraph 46F(2)(a)(i) of this Act as in force just before the commencement of those amendments, the company would have been entitled to a rebate under section 46 of this Act as so in force in respect of the unfranked amount of the dividend. The amount of the credit is the unfranked amount of the dividend. The credit arises when the dividend is paid to the company. Debits  (5) An unfranked non‑portfolio dividend debit arises for a company if the company makes a declaration under paragraph 46FA(1)(f) in relation to a dividend paid on a particular day. The amount of the debit is the flow‑on amount under subsection 46FA(2). The debit arises when the declaration is made. group company has the same meaning as in former section 160AFE as in force immediately before 1 July 2002. non‑portfolio dividend has the same meaning as in section 317. unfranked amount of a dividend (including an unfrankable distribution within the meaning of section 202‑45 of the Income Tax Assessment Act 1997) means the amount of the dividend less the franked part.