(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:
Start formula Percentage specified under paragraph (1)(f) times Unfranked amount of the flow-on dividend end formula
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.
Definitions
(11) In this section:
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.
Definitions
(6) In this section:
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.
47 Distributions by liquidator
(1) Distributions to shareholders of a company by a liquidator in the course of winding‑up the company, to the extent to which they represent income derived by the company (whether before or during liquidation) other than income which has been properly applied to replace a loss of paid‑up share capital, shall, for the purposes of this Act, be deemed to be dividends paid to the shareholders by the company out of profits derived by it.
(1A) A reference in subsection (1) to income derived by a company includes a reference to:
(a) an amount (except a net capital gain) included in the company’s assessable income for a year of income; or
(b) a net capital gain that would be included in the company’s assessable income for a year of income if the Income Tax Assessment Act 1997 required a net capital gain to be worked out as follows:
Method statement
Step 1. Work out each capital gain (except a capital gain that is disregarded) that the company made during that year of income. Do so without indexing any amount used to work out the cost base of a CGT asset.
Step 2. Total the capital gain or gains worked out under Step 1. The result is the net capital gain for that year of income.
(2) Those distributions shall, to the extent to which they are made out of any profits or income, be deemed to have been paid wholly and exclusively out of those profits or that income.
(2A) Where:
(a) the business of a company has been, or is in the course of being, discontinued otherwise than in the course of a winding up of the company under any law relating to companies;
(b) in connexion with the discontinuance, any moneys of the company have been or other property of the company has been, on or after 19 October 1967, distributed, otherwise than by the company, to shareholders of the company; and
(c) the moneys or other property so distributed are not, for the purposes of this Act, dividends;
the distribution shall, subject to subsection (2B), be deemed to be, for the purposes of this section, a distribution to the shareholders by a liquidator in the course of winding up the company.
(2B) Where:
(a) subsection (2A) would, but for this subsection, apply in relation to any moneys or other property of a company distributed to shareholders of the company; and
(b) the company does not cease to exist within a period of 3 years after the distribution, or within such further period as the Commissioner allows;
subsection (2A) shall not apply, and shall be deemed never to have applied, in relation to those moneys or that other property, and those moneys or that other property so distributed shall, for the purposes of this Act, be deemed to be dividends paid by the company to the shareholders out of profits derived by it.
(3) For the purposes of this section, paid‑up share capital includes capital which has been paid up in money or by other valuable consideration and which has been cancelled and has not been repaid by the company to the shareholders.
47A Distribution benefits—CFCs
(1) Subject to subsection (2), if:
(a) a company (in this section called the first company) has profits immediately before a distribution time for a distribution benefit in relation to the first company; and
(b) the distribution time occurred after 3 June 1990; and
(c) the first company is a CFC at the distribution time; and
(d) the first company is a resident of an unlisted country at the distribution time;
so much of the distribution payment in relation to the distribution time as would not otherwise be a dividend and does not exceed the amount of those profits is taken, for the purposes of this Act, to be a dividend paid by the first company:
(e) to the recipient of the benefit as a shareholder in the first company; and
(f) out of profits derived by the first company; and
(g) at the distribution time.
(2) If:
(a) any of the following subparagraphs applies:
(i) by virtue of subsection (1), the whole or a part of the distribution payment is included in the assessable income of a taxpayer of the year of income in which the distribution time occurred under section 44;
(ii) by virtue of subsection (1), the whole or a part of the distribution payment would, apart from section 23AI or section 768‑5 of the Income Tax Assessment Act 1997, be included in the assessable income of a taxpayer of the year of income in which the distribution time occurred under section 44; and
(b) both of the following subparagraphs apply:
(i) the taxpayer’s return of income for the year of income was not prepared on the basis that the distribution payment had the consequence specified in subsection (1);
(ii) the taxpayer has not notified the Commissioner, in writing, within 12 months after the end of the year of income, that the distribution payment had the consequence specified in subsection (1);