Section OZ 5 — Income Tax Act 2007: ASCA lost excess available subscribed capital

OZ 5 ASCA lost excess available subscribed capital When this section applies (1) This section applies when a public unit trust or a group investment fund that derives category A income— (a) is in existence between 17 October 2002 and 30 September 2003 (both dates inclusive); and (b) has redeemed a unit in the trust or fund; and (c) the slice rule was used to determine the tax treatment of the proceeds from the redemption; and (d) the amount of the available subscribed capital, calculated on a per unit basis, is greater than the proceeds from the redemption for the unit. Calculating opening balance (2) The trust or fund may choose for the period to calculate an opening credit balance using 1 of the methods set out in subsections (3) and (4). Method 1 (3) Method 1 requires the trust or fund to calculate the actual amount of available subscribed capital lost, that is the difference, in total, between the amount paid on subscription for a unit and the amount paid on redemption of the unit. Method 2 (4) Method 2 requires the trust or fund to make a calculation for the notional winding up of the trust or fund by taking the following steps: (a) step 1: determine the total amount of income tax that would be payable on liquidation, treating the value of assets and liabilities as determined at their market value at the date of the notional liquidation according to provisions applying at that date: (b) step 2: determine the amount of notional credits that are available after notional tax is paid in relation to them: (c) step 3: determine the amount of notional credits required to fully impute, for each unit holder, the payment of a redemption dividend, and aggregate the amounts, applying the maximum imputation ratio to the total amount: (d) step 4: establish the imputation credit shortfall between the notional credits under step 2 and the credits required under step 3. Opening balance (5) The amount of the opening balance is— (a) the amount of the difference for method 1; and (b) the shortfall referred to in subsection (4)(d) for method 2. Certain causes of shortfalls (6) For the purposes of subsection (4), the structural features of the taxation and imputation systems that would allow a company that does not issue shares on terms subject to section CD 22(4) (Returns of capital: off-market share cancellations) to fully impute a distribution made on the liquidation of the company, include the tax effects of— (a) non-taxable gains and losses, including exempt income; and (b) imputation credits lost because shareholder continuity is lost; and (c) foreign tax credits; and (d) retained earnings generated before the trust or fund established an imputation credit account. Date of notional liquidation, orderly calculations (7) For the purposes of this section,— (a) the date of notional liquidation is the date chosen by the trust or fund falling in the period referred to in subsection (1)(a): (b) a calculation under this section must be undertaken in a manner consistent with the preparation of financial statements and unit pricing calculations, based on an orderly realisation of assets in the ordinary course of business and demonstrable market valuations. Defined in this Act: amount , available subscribed capital , business , category A income , company , dividend , exempt income , financial statements , foreign tax , group investment fund , imputation credit , imputation credit account , imputation ratio , liquidation , pay , public unit trust , share , shareholder , slice rule Compare: 2004 No 35 ss MJ 1(2) , MJ 4 , MJ 5(1) Section OZ 5(1)(d): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 121(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section OZ 5(6)(a): substituted (with effect on 30 June 2009), on 6 October 2009, by section 485(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section OZ 5 compare note: amended (with effect on 1 April 2008), on 29 August 2011, by section 121(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).