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INCOME TAX ASSESSMENT ACT 1997 - SECT 204.25

Substituting tax-exempt bonus shares for franked distributions

Franking debit arises if tax-exempt bonus shares are issued in substitution for a franked distribution

             (1)  This section gives rise to a * franking debit in an entity's * franking account if:

                     (a)  the exercise of a choice or selection by a * member of the entity; or

                     (b)  the member's failure to exercise a choice or selection;

has the effect of determining (to any extent) that the entity issues one or more * tax-exempt bonus shares, to that member or another member of the entity, in substitution (in whole or in part) for one or more * franked distributions by the entity to that member or another member.

Amount of the debit

             (2)  The debit is equal to the one that would arise in the entity's * franking account if the entity made a * distribution, equal to the * franked distributions referred to in subsection (1), franked at the entity's * benchmark franking percentage for the * franking period in which the shares are issued.

When does the debit arise

             (3)  The debit arises on the day when the shares are issued.

Meaning of tax-exempt bonus share

             (4)  For a company whose * shares have no par value, tax-exempt bonus share means a share issued by the company in the circumstances mentioned in subsection 6BA(6) of the Income Tax Assessment Act 1936 .

             (5)  For any other company, tax-exempt bonus share means a * share issued by the company to a * shareholder in the company where:

                     (a)  the amount or value of the share is debited against an amount standing to the credit of a share premium account of the company; and

                     (b)  no part of the paid-up value of the share is a dividend; and

                     (c)  the share is issued:

                              (i)  as a bonus share; or

                             (ii)  in the circumstances mentioned in subsection 6BA(1) of the Income Tax Assessment Act 1936 , as in force immediately before 1 July 1998.

Where a company has no benchmark franking percentage for the franking period

             (6)  If a company has no * benchmark franking percentage for the * franking period in which the * tax-exempt bonus share is issued, this section applies as if the entity had a benchmark franking percentage of 100% for that period.

Guide to Subdivision 204-D



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