Document ID: chunk:federal_register_of_legislation:C2025C00014:section:46fa:p1
Version: federal_register_of_legislation:C2025C00014
Segment Type: section
Provision Reference: s 46FA (pt 1/2)
Character Range: 290472–293217

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