Document ID: chunk:federal_register_of_legislation:C2010C00583:clause:10_1:p8
Version: federal_register_of_legislation:C2010C00583
Segment Type: clause
Provision Reference: sch 10 cl 1 (pt 8/13)
Character Range: 69566–72376

immediately after a liability to franking deficit tax arises. Subsection (4) of this section causes such a liability to arise under section 205‑45.

Note 2: Paragraph 220‑605(3)(a) gives rise to a franking debit if the NZ franking choice of a company that is a former exempting entity is revoked or cancelled and the company's exempting account is in deficit immediately before the revocation or cancellation.

Franking donor company's benchmark franking percentage

 (7) Subsection (5) does not affect the franking donor company's *benchmark franking percentage.

Special rules if franking donor company is former exempting entity

 (8) If the franking donor company becomes a *former exempting entity at the first time all the conditions in subsection (1) are met:
 (a) subsections (3) and (4) do not apply; and
 (b) subsection (5) does not apply in relation to:
 (i) a *franking credit arising in the franking donor company's *franking account under item 1 of the table in section 208‑130 immediately after that time; or
 (ii) a *franking debit arising in the franking donor company's franking account under item 1 of the table in section 208‑145 immediately after that time.

Note: Subsection (8) ensures that the franking donor company's franking account has a nil balance immediately after the company becomes a former exempting entity and that there is an appropriate balance in the company's exempting account that is not made available for use by the NZ recipient company in franking distributions.

[The next section is section 220‑400.]

Effects of supplementary dividend from NZ franking company

220‑400  Gross‑up and tax offset for distribution from NZ franking company reduced by supplementary dividend

 (1) This section has effect if:
 (a) an *NZ franking company:
 (i) makes a *franked distribution to an entity (the recipient) in an income year; and
 (ii) pays a supplementary dividend (as defined in section OB1 of the Income Tax Act 1994 of New Zealand) to the recipient in connection with the franked distribution; and
 (b) under section 207‑20:
 (i) an amount is included in the recipient's assessable income for the income year; and
 (ii) the recipient is entitled to a *tax offset for the income year; and
 (c) the recipient is entitled under section 160AF (Credits in respect of foreign tax) of the Income Tax Assessment Act 1936 to a credit because of the inclusion of the *distribution in the recipient's assessable income for the income year; and
 (d) the recipient's income tax for the income year is reduced to some extent on account of the credit.

Reduced gross‑up

 (2) The amount included in the recipient's assessable income is reduced by the amount of the supplementary dividend (but not below zero).

Reduced tax offset

 (3) The amount of the *tax offset is reduced