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Module 9 (Part A: Taxation of companies (Special tax issues (Tax loss…
Module 9
Part A: Taxation of companies
Calculation of taxable income (pg 607)
corporate unit trust/public unit trust
rate for non-profit company that is small business entity
Assessment and payment of tax (pg. 613)
Residency (pg 607)
Gross up and franking credit tax offset
entitle to tax offset for franking credit (pg 614)
The taxpayer is a particular kind of taxpayer,
The taxpayer is a natural person (i.e. not a company) whose tax offset for franking credits amounts to less than $5000 for the year
taxpayers to hold shares at risk for at least 45 days
Classification of companies—public or private (pg 606)
Concept of a company for tax purposes (p.605)
Special tax issues
Expenditure on research and development (pg 616)
Tax loss recoupment rules for widely held companies (pg 618)
Converting excess franking offsets into tax losses (pg 621)
Rules on how tax losses are deducted
Same business test (pg 619)
Other special rules when dealing with losses
Simplified COT (pg 619)
Restrictions on companies with losses or bad debts
continuity of majority ownership test (pg 616)
alternative test-tracing ownership through entities (pg 617)
Part B: Taxation of dividends
Definition of dividend
definition (p.622)
Share capital tainting - Distributions of share capital may be taxed
Deemed dividends
Division 7A
Loans made by the company to a shareholder or shareholder’s associate (pg 625)
Debts that were owed by the shareholder or shareholder’s associate to the company, which the company forgives (pg 626)
Payments made by the company to a shareholder or shareholder’s associate (s. 109C) (pg 624)
Distributable surplus (p.628)
Division 7A deemed dividend consequences/interaction of Division 7A and FBT (p.630)
Reborrowing arrangements (p.630)
Exclusion from Division 7A
Loans that meet minimum interest rate and maximum term criteria (pg 631)
Amalgamated loan (pg 632)
Anti-avoidance provisions for payments and loans through interposed entities (pg 633)
Trusts and corporate beneficiaries (pg 633)
Concessions available under Division 7A (pg 634)
Streaming of bonus shares/distributions of preferentially
taxed capital (pg 635)
Bonus share issues (p.636)
Redeemable preference shares (pg 637)
buy back the preference shares
if the buy back price > amount paid-up notice => excess will be deividend
Excessive remuneration (pg 637)
Share buy-backs (pg 637)
Distribution by liquidators (pg 639)
Is the dividend assessable? (6.40)
Debt and equity
Test that determines whether an interest is a debt interest (pg 642)
Test that determines whether an interest is a equity interest (pg 643)
At-call loans by connected entity (pg 645)
Dividend imputation system
Corporate entities (pg 646)
Distributions (pg 646)
Maximum franking credit (pg 648)
Franking percentage (pg 649)
Distribution statements (pg 651)
listed investment company (pg 652)
The benchmark rule
Ascertaining the franking period (pg 654)
Ascertaining the benchmark franking percentage for that period (pg 655)
Consequences of breaching benchmark rule (pg 655)
Commissioner of Taxation’s power to permit departure from benchmark rules (pg 657)
The disclosure rule (pg 659)
Franking account (pg 660)
Franking credits (pg 661)
Franking debits (pg 662)
Franking deficit tax (pg 664)
Excessive overfranking (pg 665)
Relief from 30 per cent tax offset reduction
Effect of receiving a franked distribution (pg 668)
Tax offset for direct distributions to entities other than
partnerships or trusts (pg 669)
Tax offset for indirect distributions through partnerships
and trusts (pg 679)
Gross up and offset rules (pg 674)
No offset if the imputation system has been manipulated (pg 675)
No tax offset if distribution is exempt income (pg 674)
Residency requirements for tax offsets
Administration of imputation system—franking account tax return (pg 675)