(3) In making a decision under subsection (2) (or refusing to make such a decision), the Commissioner must have regard to the following:
(a) the circumstances that led to the mistake or omission mentioned in paragraph (1)(b);
(b) the extent to which any of the entities mentioned in paragraph (1)(b) have taken action to try to correct the mistake or omission and if so, how quickly that action was taken;
(c) whether this Division has operated previously in relation to any of the entities mentioned in paragraph (1)(b), and if so, the circumstances in which this occurred;
(d) any other matters that the Commissioner considers relevant.
(4) The Commissioner may make a decision under subsection (2) subject to any of the following kinds of condition:
(a) a condition that the recipient or another entity must make specified payments to the private company or another entity within a specified time;
(b) a condition that a specified requirement in this Division must be met within a specified time.
(5) This Division is taken not to operate with the result mentioned in paragraph (1)(a) if:
(a) the Commissioner makes a decision under paragraph (2)(a); and
(b) if the Commissioner makes the decision subject to a condition under subsection (4)—the condition is satisfied.
(6) If the Commissioner makes a decision under paragraph (2)(b), subparagraph 202‑45(g)(i) of the Income Tax Assessment Act 1997 does not make the dividend mentioned in subparagraph (1)(a)(i) unfrankable.
(7) Despite subsection 33(3A) of the Acts Interpretation Act 1901, each decision made under subsection (2) must relate only to one amount that would (disregarding this section):
(a) be taken to be a dividend paid by the private company; or
(b) be included, as if it were a dividend, in the assessable income of an entity.
109RC Dividend may be franked if taken to be paid because of family law obligation
(1) This section applies if a dividend is taken to be paid under this Division because of a family law obligation.
(2) Subparagraph 202‑45(g)(i) of the Income Tax Assessment Act 1997 does not make the amount of the dividend unfrankable.
(3) The dividend can be franked in accordance with Part 3‑6 of the Income Tax Assessment Act 1997 only if:
(a) the dividend is franked at the private company’s benchmark franking percentage for the franking period in which the dividend is taken to be paid; or
(b) if the private company does not have a benchmark franking percentage for the period—the dividend is franked at a franking percentage of 100%.
(4) For the purposes of subsection (3), if the recipient of the dividend is not a member of the private company for the purposes of Part 3‑6 of the Income Tax Assessment Act 1997, treat that recipient as such a member.
109RD Commissioner may extend period for repayments of amalgamated loan
(1) The Commissioner may make a decision under subsection (2) if:
(a) section 109E operates with the result that a private company is taken to pay a particular dividend to a particular entity (the recipient); and
(b) the shortfall mentioned in paragraph 109E(1)(c) arises because the recipient is unable to pay the private company the minimum yearly repayment mentioned in that paragraph because of circumstances beyond the recipient’s control.
(2) The Commissioner may decide in writing that the result mentioned in paragraph (1)(a) should be disregarded (see subsection (4)) if the recipient pays the private company the amount of the shortfall within a specified time.
(3) In making a decision under subsection (2) (or refusing to make such a decision), the Commissioner must have regard to the following:
(a) the nature of the circumstances mentioned in paragraph (1)(b);
(b) any other matters that the Commissioner considers relevant.
(4) This Division is taken not to operate with the result mentioned in paragraph (1)(a) if:
(a) the Commissioner makes a decision under subsection (2); and
(b) the recipient pays the private company the amount of the shortfall within the specified time.
(5) Despite subsection 33(3A) of the Acts Interpretation Act 1901, each decision made under subsection (2) must relate only to one amount that would be taken to be a dividend paid by the private company (disregarding this section).
Subdivision E—Payments and loans through interposed entities
109S Simplified outline of this Subdivision
The following is a simplified outline of this Subdivision:
This Subdivision allows a private company to be taken under Subdivision B to pay a dividend to an entity (the target entity) if an entity interposed between the private company and the target entity makes a payment or loan to the target entity under an arrangement involving the private company.
This result is achieved by treating the private company as making a payment or loan of an amount determined by the Commissioner to the target entity (according to whether the interposed entity made a payment or loan to the target entity). (See sections 109V (for payments) and 109W (for loans).)
The arrangement must involve the private company and one or more interposed entities in making payments or loans or giving loan guarantees for the purpose of the target entity receiving a payment or loan from an interposed entity. (See sections 109T, 109U and 109UA.)
If the target entity repays a fraction of the loan made by the interposed entity, the target entity is treated as repaying the same fraction of the loan taken to have been made by the private company. (See subsection 109W(3).)
Some provisions that prevent payments or loans from giving rise to dividends do not apply to payments or loans this Subdivision treats a private company as making. (See section 109X.)
109T Payments and loans by a private company to an entity through one or more interposed entities
(1) This Division operates as if a private company makes a payment or loan to an entity (the target entity) as described in section 109V or 109W if:
(a) the private company makes a payment or loan to another entity (the first interposed entity) that is interposed between the private company and the target entity; and
(b) a reasonable person would conclude (having regard to all the circumstances) that the private company made the payment or loan solely or mainly as part of an arrangement involving a payment or loan to the target entity; and
(c) either:
(i) the first interposed entity makes a payment or loan to the target entity; or
(ii) another entity interposed between the private company and the target entity makes a payment or loan to the target entity.
This section operates regardless of certain factors
(2) For the purposes of this section, it does not matter:
(a) whether the interposed entity made the payment or loan to the target entity before, after or at the same time as the first interposed entity received the payment or loan from the private company; or
(b) whether or not the interposed entity paid or lent the target entity the same amount as the private company paid or lent the first interposed entity.
This section does not operate if the payment or loan to the first interposed entity is treated as a dividend
(3) This Division does not operate as described in subsection (1) (and sections 109V and 109W) if the private company is taken under Subdivision B (as it applies apart from this Subdivision) to pay a dividend as a result of the payment or loan to the first interposed entity.
109U Payments and loans through interposed entities relying on guarantees
(1) This Division operates as if a private company makes a payment to an entity (the target entity) as described in section 109V if:
(a) during a year of income the private company guarantees a loan made by another entity (the first interposed entity); and
(b) a reasonable person would conclude (having regard to all the circumstances) that the private company gave the guarantee solely or mainly as part of an arrangement involving a payment or loan to the target entity; and
(c) either:
(i) the first interposed entity that is a private company makes a loan to the target entity; or
(ii) another entity that is a private company interposed between the private company and the target entity makes a payment or loan to the target entity; and
(d) the amount of the payment or the loan is greater than the amount worked out using the formula:
Start formula Distributable surplus minus Subsection 109Y(3) amount end formula
(2) The amount of the payment from the private company to the target entity (as worked out under section 109V) is to be reduced by the amount worked out using the formula:
Start formula Distributable surplus minus Subsection 109Y(3) amount end formula
(3) In the formulas in paragraph (1)(d) and subsection (2):
distributable surplus means the distributable surplus (worked out under subsection 109Y(2)) for the interposed entity that made the payment or loan to the target entity for the year of income.
subsection 109Y(3) amount means the total of any amounts calculated under subsection 109Y(3) in relation to that interposed entity for the year of income (apart from as a result of the operation of this section).
This section operates regardless of certain factors
(4) For the purposes of this section, it does not matter:
(a) whether the interposed entity made the payment or loan to the target entity before, after or at the same time as the first interposed entity received the guarantee from the private company; or
(b) whether or not the interposed entity paid or lent the target entity the same amount as the private company guaranteed.
109UA Certain liabilities under guarantees treated as payments
(1) Section 109T operates as if one entity (the first entity) makes a payment to a second entity if the first entity guarantees a loan the second entity makes to a third entity (the target entity) and, as a result of the guarantee, the first entity has a liability (other than a contingent liability) to make a payment to the second entity.
Example: A private company guarantees a loan that a bank makes to a shareholder in the private company and the shareholder defaults on the loan. As a result, the company has a presently existing liability to make a payment to the bank. Section 109T operates as if the private company had made a payment to the bank, so the company is treated by section 109V as making a payment to the shareholder (because the bank is interposed between company and shareholder).
(2) The amount of the payment (as worked out under section 109V) is to be reduced by any amount treated as a dividend as a result of the operation of section 109U in relation to the payment or loan made by the interposed entity to the target entity.
(3) A private company is not taken under this Division to pay a dividend because of the operation of subsection (1) in relation to a guarantee if the Commissioner is satisfied that:
(a) the target entity would suffer undue hardship if the private company were taken to pay a dividend to the entity because of the liability; and
(b) when the target entity entered into the loan, the entity had the capacity to pay the loan.
(4) This section does not the limit the operation of section 109T.
(5) Subsection (1) does not apply if:
(a) as a result of the first entity’s liability mentioned in that subsection, the target entity has a liability (other than a contingent liability) to make a payment to the first entity; and
(b) because of section 109N, the liability to make a payment to the first entity is not treated under this Division as giving rise to a dividend paid to the first entity.
109V Amount of private company’s payment to target entity through one or more interposed entities
Private company taken to pay if target entity is paid
(1) If the target entity is paid an amount by the interposed entity, this Division operates as if the private company had paid the amount (if any) determined by the Commissioner to the target entity when the interposed entity paid the target entity.
Determining the amount of the private company’s payment
(2) In determining the amount of the payment the private company is taken to have made, the Commissioner must take account of:
(a) the amount the interposed entity paid the target entity; and
(b) how much (if any) of that amount the Commissioner believes represented consideration payable to the target entity by the private company or any of the interposed entities for anything (assuming that the consideration payable equals that for similar transactions at arm’s length).
109W Private company’s loan to target entity through one or more interposed entities
Private company taken to lend if target entity receives loan
(1) If the target entity is lent an amount by the interposed entity, this Division operates as if the private company had made a loan (the notional loan) of the amount (if any) determined by the Commissioner to the target entity when the interposed entity made the loan to the target entity.
Note: Subsection 109D(4) specifies the time at which a loan is made.
How big is the notional loan?
(2) In determining the amount of the notional loan, the Commissioner must take account of:
(a) the amount the interposed entity lent the target entity; and
(b) how much (if any) of that amount the Commissioner believes represented consideration payable to the target entity by the private company or any of the interposed entities for anything (assuming that the consideration payable equals that for similar transactions at arm’s length).
Notional repayments of notional loan
(3) When working out whether the private company is taken under section 109D to pay a dividend as a result of the notional loan, and the amount of any such dividend, assume that the target entity repays an amount of the notional loan equal to the amount worked out using the formula:
Start formula Repayment made by target entity to lender times start fraction Amount of notional loan over Amount actually lent to target entity end fraction end formula
where:
amount actually lent to target entity is the amount the interposed entity lent to the target entity.
repayment made by target entity to lender is the amount of any repayment made by the target entity of the loan the interposed entity made to the target entity.
109X Operation of Subdivision D in relation to payment or loan
Payment or loan not affected by being made through interposed entity
(1) Despite sections 109K and 109L, a private company may be taken under section 109C or 109D to pay a dividend as a result of this Subdivision treating the private company as making a payment or loan to an entity (the target entity), even if:
(a) the private company is treated that way because it makes a payment or loan to an entity that is a company interposed between the private company and the target entity; or
(b) some or all of the amount paid or lent by a private company to an entity interposed between the private company and the target entity is included in the interposed entity’s assessable income for a year of income.
(2) Subsections (3) and (4) apply if a notional loan arises under section 109W because an entity interposed between the private company and the target entity makes a loan (the actual loan) to the target entity.
(3) For the purposes of section 109N, treat the agreement under which the actual loan was made as the agreement under which the notional loan was made.
(4) For the purposes of section 109E:
(a) treat the notional loan as an amalgamated loan from the private company to the target entity; and
(b) treat the amount of the notional loan worked out under subsection 109W(1) as the amount of the amalgamated loan; and
(c) treat the agreement under which the actual loan was made as the agreement under which the amalgamated loan was made; and
(d) treat repayments by the target entity of the amount of the notional loan worked out under subsection 109W(3) as payments by the target entity to the private company in relation to the amalgamated loan.
Subdivision EA—Unpaid present entitlements
109XA Payments, loans and debt forgiveness by a trustee in favour of a shareholder etc. of a private company with an unpaid present entitlement
Payments
(1) Section 109XB applies if:
(a) a trustee makes a payment (including a payment through an interposed entity as described in section 109XF) to a shareholder or an associate of a shareholder of a private company (except a shareholder or associate that is a company) (the actual transaction); and
(b) the payment is a discharge of or a reduction in a present entitlement of the shareholder or associate that is wholly or partly attributable to an amount that is an unrealised gain; and
(c) either:
(i) the company is presently entitled to an amount from the net income of the trust estate at the time the actual transaction takes place, and the whole of that amount has not been paid to the company before the earlier of the due date for lodgment and the date of lodgment of the trustee’s return of income for the trust for the year of income of the trust in which the actual transaction takes place; or
(ii) the company becomes presently entitled to an amount from the net income of the trust estate after the actual transaction takes place, but before the earlier of the due date for lodgment and the date of lodgment of the trustee’s return of income for the trust for the year of income of the trust in which the actual transaction takes place, and the whole of the amount has not been paid to the company before the earlier of those dates.
Note: For entitlements through interposed trusts, see section 109XI.
Loan repayments
(1A) Disregard paragraph (1)(b) if:
(a) subsection (1) has previously applied because the trustee made a payment (the original transaction) to the shareholder, or to an associate of the shareholder, during a previous year of income; and