Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 2) 1987No. 62, 1987 - SECT 27

27. After section 104 of the Principal Act the following section is inserted:
Phasing-out dividends

"105. (1) Where, but for subsection (7), a company has made a sufficient
distribution in relation to the year of income commencing on 1 July 1985 or a
subsequent year of income, the phasing-out amount of the company in relation
to the year of income is the amount of the excess referred to in subsection
105A (1) ascertained as at the end of the prescribed period and without regard
to section 105AA.

"(2) Where, but for subsection (7), a company has not made a sufficient
distribution in relation to the year of income commencing on 1 July 1985 or a
subsequent year of income, the phasing-out amount of the company in relation
to the year of income is the amount of the dividends taken into account in
determining the undistributed amount in relation to the year of income
ascertained as at the end of the prescribed period and without regard to
section 105AA.

"(3) Where the amount that, but for subsection (7), would be the phasing-out
amount of a company in relation to a year of income is greater than nil:

   (a)  the company shall:

        (i)    allocate the whole, or particular parts, of the phasing-out
               amount to the shareholder, or to all or any of the
               shareholders, to whom dividends (in this subsection called the
               'eligible dividends'), being dividends taken into account in
               ascertaining whether the company has made a sufficient
               distribution in relation to the year of income, were paid so
               that:

                (A)  a shareholder is not allocated an amount that exceeds the
                     amount of eligible dividends so paid to the shareholder;
                     and

                (B)  the sum of the amounts so allocated equals the phasingout
                     amount;

        (ii)   give to each such shareholder a notice in writing specifying
               the amount allocated to the shareholder; and

        (iii)  give to the Commissioner a copy of each such notice; and

   (b)  the allocation under paragraph (a) shall be made, and the notices
        given:

        (i)    if the prescribed period ended before the commencement of this
               subsection - within 28 days after the commencement of this
               subsection; or

        (ii)   in any other case - within 28 days after the end of the
               prescribed period; or within such further time as the
               Commissioner allows.

"(4) Where dividends (in this subsection called 'retrospective dividends')
paid to a shareholder in a company after 1 July 1985 are deemed by section
105AA to have been paid during the prescribed period in relation to a year of
income of the company:

   (a)  the company shall:

        (i)    give to each shareholder to whom any of the retrospective
               dividends were paid a notice in writing stating that this
               subsection applies to the retrospective dividends paid to the
               shareholder; and

        (ii)   give to the Commissioner a copy of each such notice; and

   (b)  the notices under paragraph (a) in relation to the payment of
        dividends to a shareholder shall be given:

        (i)    if the dividends were paid before the commencement of this
               subsection - within 28 days after the commencement of this
               subsection or such further time as the Commissioner allows; or

        (ii)   in any other case - not later than 28 days after the time of
               payment of the dividends or such later time as the Commissioner
               allows.

"(5) Where all of the following conditions are satisfied in relation to
dividends paid by a company:

   (a)  the dividends were paid after 1 July 1985;

   (b)  the dividends are taken into account in determining whether the
        company has made a sufficient distribution in relation to the year of
        income commencing on 1 July 1984 or an earlier year of income;

   (c)  apart from section 105AA, the dividends were paid during the
        prescribed period in relation to the year of income to which paragraph
        (b) applies; the company shall, within 28 days after the commencement
        of this subsection or such further time as the Commissioner allows,
        give a notice in writing to each shareholder to whom any of the
        dividends were paid stating that this subsection applies to the
        dividends paid to the shareholder.

"(6) The distributable income of a company of a year of income (in this
subsection called the 'current year of income') shall be taken to include
phasing-out dividends of an amount equal to so much of the aggregate of the
following amounts as does not exceed the distributable income:

   (a)  where the company has been given a notice under paragraph (3) (a) in
        relation to dividends paid to the company in the current year of
        income:

        (i)    if the notice relates only to dividends paid to the company in
               the current year of income - the amount allocated to the
               company in accordance with paragraph (3) (a);

        (ii)   if the notice relates to dividends paid to the company in the
               current year of income and also relates to dividends paid to
               the company in the year of income next succeeding the current
               year of income - so much of the amount allocated to the company
               in accordance with paragraph (3) (a) as does not exceed the
               amount of the dividends to which the notice relates that were
               paid to the company in the current year of income; and

        (iii)  if the notice relates to dividends paid to the company in the
               current year of income and also relates to dividends paid to
               the company in the year of income preceding the current year of
               income - the amount allocated to the company in accordance with
               paragraph (3) (a) reduced by so much of that amount as was
               taken into account in applying subparagraph (ii) of this
               paragraph to that preceding year of income;

   (b)  if the current year of income is the year of income commencing on 1
        July 1986 or a later year of income and the company has been given a
        notice under subsection (4) or (5) in relation to dividends paid to
        the company in the current year of income - the amount of the
        dividends paid.

"(7) If a company contravenes subsection (3), (4) or (5) in relation to a year
of income, this Division applies to the company in relation to the year of
income as if the company did not pay any dividends during the prescribed
period.".