Issue
Is the extra amount that is included in a member's assessable income where a franked dividend is paid under section 160AQT of the Income Tax Assessment Act 1936 (ITAA 1936) also included in the member's adjusted taxable income (ATI ) under section 43 of the Superannuation Contributions Tax (Assessment & Collection) Act 1997 (SCTA 1997)?
Decision
Yes, the extra amount that is included in a member's assessable income where a franked dividend is paid under section 160AQT of ITAA 1936 is to be included in the member's ATI under section 43 of the SCTA 1997.
Facts
The member received franked dividends for the relevant financial year and received an imputation credit in his notice of assessment.
The person was a member of an accumulation superannuation fund.
The member subsequently received an advice indicating that a superannuation surcharge assessment issued to his superannuation provider in relation to surchargeable contributions reported for the relevant period.
The Commissioner calculated the member's ATI on the taxable income in the notice of assessment and reported surchargeable contributions for the relevant year.
Reasons for Decision
A franked dividend is a dividend paid or credited to a shareholder by an Australian resident company from profits that have had Australian company tax paid on them (sections 160APA and 160AQF of the ITAA 1936).
A shareholder who receives a franked dividend is required to include it in his assessable income an extra amount under section 160AQT of the ITAA 1936. The extra amount is equivalent to the amount of company tax attributable to the dividend. The shareholder is then entitled to claim that amount as an imputation credit under section 160AQU of the ITAA 1936.
For each financial year in which the member has surchargeable contributions, section 15 of the SCTA 1997 requires the Commissioner to calculate the member's ATI. Under section 43 of the SCTA 1997, a member's ATI includes the member's taxable income plus his surchargeable contributions for the financial year.
As the extra amount of the dividend income was included in the member's taxable income it has to be included in the ATI for the calculation of the member's superannuation surcharge.