Income tax: imputation of company tax: form approved by Commissioner of Taxation for issue to shareholders receiving dividends for 1994-95 and later franking years

This Ruling provides details of revised approved formats for dividend statements that an Australian resident company must provide to shareholders when paying a dividend. The formats are being revised because of proposed changes to the operation of the imputation system.

The revised formats for dividend statements will apply in relation to a company's 1994-95 and later franking years. Taxation Ruling IT 2417 sets out details of the format for 1993-94 and earlier franking years and will be superseded by this Ruling.

Approval is granted for resident companies to use their own shareholder dividend statement providing it is substantially in accordance with one of the approved forms of the statement set out in the appropriate attachment to this Ruling. Alternatively, the required information may be incorporated in to existing dividend warrants.

Requests for approval of any substantial variation of the shareholder dividend statement format should be directed to the Deputy Commissioner at the office at which the company lodges its income tax returns.

A company will be able to pay a dividend that is both class A and class B franked and/or partially franked. In this event, it is possible that calculation of the percentage between the respective franked amounts and between the franked and unfranked component may run to more than two decimal places. For the purpose of recording the class A and class B franked amounts and the unfranked component, respectively, on the shareholder dividend statement, these calculations may be rounded off to the nearest cent. If there is an FDA amount less than the entire amount of the dividend, it may also be rounded off to the nearest cent.

The amount of the class A and class B imputation credits may also be rounded off to the nearest cent. However, these amounts must be calculated having regard to the class A and class B franked amounts of the dividend prior to rounding.

The proposed changes to the imputation system with effect from a company's 1994-95 franking year will mean the franked amount of a franked dividend may be made up of two components - a class A and class B franked amount. Broadly, the two classes reflect tax paid at different rates. The class A franked amount will give rise to an imputation credit based on company tax paid at the 39% rate. The class B franked amount will give rise to an imputation credit based on company tax paid at the 33% rate.

Under the proposed changes, section 160AQH of the Income Tax Assessment Act 1936 will require a resident company to give to shareholders, either before or at the time of payment of a dividend, a statement that includes the following details: (a) if the dividend is unfranked - a declaration to that effect; (b) if the dividend is franked then: (i) the class A or class B franked amount, or both, as the case may be; (ii) the amount remaining after deducting the sum of the class A and class B franked amounts from the amount of the dividends (ie. the unfranked amount); (iii) if the dividend has been class A franked, the gross-up amount calculated in accordance with subsection 160AQT(1), ie. 39/61 times the class A franked amount (ie. the class A imputation credit); (iv) if the dividend has been class B franked, the gross-up amount calculated in accordance with subsection 160AQT(1AA), ie. 33/67 times the class B franked amount (ie. the class B imputation credit); (v) the sum of the class A and class B imputation credits; (vi) any amount of withholding tax deducted from the dividend under section 221YL; and (c) any other information required on the approved form of the shareholder dividend statement.

For the purpose of paragraph (c) above, the following additional information is required on the shareholder dividend statement: (a) the name of the company paying the dividend; (b) the date of payment of the dividend; (c) the name of the shareholder; and (d) in the case of a franked dividend, whether it is fully franked or partially franked. A dividend is taken to be fully franked if the sum of the class A and class B franked amounts equals the amount of the dividend.

This Ruling applies to dividends paid by resident companies on or after the date of commencement of the company's 1994-95 franking year. Note: The Addendum to this Ruling that issued on 7 July 1994 applies to dividends paid by resident companies, after 1 July 1994, that consist partly or wholly of an FDA amount.