Document ID: chunk:federal_register_of_legislation:C2012C00388:clause:4_1:p6
Version: federal_register_of_legislation:C2012C00388
Segment Type: clause
Provision Reference: sch 4 cl 1 (pt 6/10)
Character Range: 24036–26845

to the transfer

197‑45  A franking debit arises in relation to the transfer

 (1) A *franking debit arises in a company's *franking account if an amount (the transferred amount) to which this Division applies is transferred to the company's *share capital account. The debit arises immediately before the end of the *franking period in which the transfer of the amount occurs.

 (2) The amount of the *franking debit is calculated in accordance with the formula:
where:

applicable franking percentage means:
 (a) if, before the debit arises, the *benchmark franking percentage for the *franking period in which the transfer of the amount occurs has already been set by section 203‑30—that percentage; or
 (b) otherwise—100%.

Subdivision 197‑C—Consequence of transfer: tainting of share capital account

Table of sections

197‑50 The share capital account becomes tainted (if it is not already tainted)
197‑55 Choosing to untaint a tainted share capital account
197‑60 Choosing to untaint—liability to untainting tax
197‑65 Choosing to untaint—further franking debits may arise
197‑70 Due date for payment of untainting tax
197‑75 General interest charge for late payment of untainting tax
197‑80 Notice of liability to pay untainting tax
197‑85 Evidentiary effect of notice of liability to pay untainting tax

197‑50  The share capital account becomes tainted (if it is not already tainted)

 (1) A company's *share capital account becomes tainted when an amount to which this Division applies is transferred to the account, if, at the time of the transfer, the account is not already tainted (because of the application of this section in relation to a previous transfer).

Note: If a company's share capital account is tainted, then a distribution from the account is taxed as a dividend in the hands of the shareholder. This is because a tainted share capital account does not count as a share capital account for the purposes of paragraph (d) of the definition of dividend in subsection 6(1) of the Income Tax Assessment Act 1936 (see subsection 6D(3) of that Act). However, although the distribution is taxed as a dividend, the company cannot pass on to the shareholder the benefit of the tax it has paid, because a distribution from a share capital account (whether or not tainted) is not frankable (see subsections 46M(1), (3) and (4) of that Act).

 (2) The *share capital account remains tainted until the company chooses to untaint the account (see section 197‑55).

Note: If, after a choice to untaint is made, the company's share capital account becomes tainted again, the account remains tainted until a fresh choice to untaint is made.

 (3) The tainting amount, for a company's *share capital account that is *tainted at a particular time, means the sum of:
 (a) the amount transferred to