The Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, today announced two measures to further simplify and clarify the dividend imputation system.
The proposed amendments to the imputation system have been developed in close consultation with business and tax practitioners and will be introduced into Parliament as soon as practicable.
The imputation system will be further simplified and streamlined by replacing the current franking additional tax provisions with a more efficient set of rules.
"The new rules will simplify the law thereby reducing compliance costs for business and administration costs for the Australian Taxation Office while still discouraging excessive overfranking," Senator Coonan said.
"Where overfranking of dividends occurs franking deficit tax (FDT) is payable and may be offset against the company's future income tax liabilities. Where "excessive" overfranking occurs the new rules will reduce the company's FDT offset by 30 per cent.
These amendments will generally apply in respect of FDT liabilities arising at the end of the 2002/03 income year and later years.
The Government will also resolve an anomaly in the interaction of the debt/equity rules and imputation rules relating to non share dividends. The anomaly prevents companies from franking non share dividends in the manner intended by Parliament.
Due to the technical nature of the amendments relating to non share dividends the Government will be consulting with industry in developing the details of the remedial legislation required.