The government has proposed to amend the law to introduce an integrity rule that will curtail taxpayers' ability to obtain a tax benefit from "dividend washing".
Broadly, "dividend washing" is a scheme that allows a taxpayer to obtain multiple franking credits in respect of a single economic interest by selling the interest after an entitlement to a franked dividend has accrued and then immediately purchasing an equivalent interest with a further entitlement to a corresponding franked dividend. The amendments, once formally enacted, are proposed to apply with effect from 1 July 2013.
The Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014
was introduced into the House of Representatives on 29 May 2014.
The Bill will amend the Income Tax Assessment Act 1997
by introducing an integrity rule to limit the ability of taxpayers to obtain a tax benefit from "dividend washing" (or "distribution washing"). Broadly, distribution washing is a scheme that allows a taxpayer to obtain multiple franking credits in respect of a single economic interest by selling the interest after an entitlement to a franked distribution has accrued and then immediately purchasing an equivalent interest with a further entitlement to a corresponding franked distribution.
Broadly, the amendments in the Bill provide that franked distributions that a taxpayer receives due to distribution washing will not entitle the taxpayer to a tax offset. In addition, the taxpayer will not be required to include the amount of the franking credit in their assessable income. For these purposes, a distribution will be considered to be received as a result of distribution washing where the taxpayer has also received a corresponding distribution in respect of a "substantially identical interest" that the taxpayer sold before acquiring the new interest. Part IVA of the ITAA 1936 will also continue to be applicable where the amendments in the Bill do not negate the benefit.
The Bill also makes various technical corrections to the imputation rules in order to clarify a number of cross-references that relate to offsets.
Date of effect
: The distribution washing amendments are proposed to apply with effect from 1 July 2013 (ie the date set out in the original policy announcement of 14 May 2013). The technical amendments to the references to offsets are proposed to generally apply with effect from 1 July 2002 (ie the date when the "misdescribed" cross-references were introduced).
The Bill also contains the following amendments:
Source: Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;page=0;query=r5260
- Protection in respect of announced but un-enacted tax amendments â€" The Bill proposes to insert s 170B into the ITAA 1936 to provide protection to taxpayers in relation to various tax measures announced by previous governments and that the present government has decided not to implement. The primary means by which protection is provided to a taxpayer who meets the conditions for protection is by preventing the Commissioner from amending assessments in relation to protected positions in a way that would produce a less favourable result for the taxpayer: proposed s 170B(1). The protection provided is limited to the particulars of an assessment that reflect the taxpayer's anticipation of the impact of an announcement that is listed for the purposes of the provision. All other particulars of the assessment are subject to the usual rules governing amendment of assessments.
Date of effect: Availability of protection will be based on statements made by or on behalf of a taxpayer that relate to the period when an identified announcement was "on foot". An announcement is considered to have been "on foot" from the day on which it was originally announced by a previous government until 14 December 2013, which is the day the current government announced that the measure would not proceed.
- Medicare levy low-income family thresholds 2013-2014 - The Bill proposes to increase the Medicare levy low-income threshold for families for 2013-2014, as well as the dependent child component of the threshold, as announced in the 2014-2015 Budget. The Bill proposes to amend ss 8(5) to 8(7) of the Medicare Levy Act 1986 to increase the family threshold for the 2013-2014 year to $34,367 (from the current $33,693). It also proposes to increase the dependent child-student component of the family income threshold for the 2013-2014 income year to $3,156 (from the current $3,094).
Date of effect: Applies to the 2013-2014 and later income years.