The Assistant Treasurer, Senator Rod Kemp announced today that the Government is going to remove the potential for double taxation of receipts under the Film Licensed Investment Company (FLIC) scheme.
Deductions are available to investors in the FLIC for their subscriptions of capital. Consequently, a FLIC does not get a deduction when it uses this capital to invest in qualifying Australian films. The situation therefore arises that the FLICs taxable income is greater than its accounting profits.
If a FLIC distributes amounts that are not profits under Corporation Law, this distribution will be one of capital and is taxed as a capital gain in the hands of shareholders. However, the shareholder cannot benefit from the FLICs imputation credits, as credits cannot be attached to returns of capital. This potentially double taxes the return on investment once at the company level and again when it is distributed to the FLIC shareholders.
The Government will be amending the law to prevent this double taxation by deeming distributions from a FLIC of amounts up to the concessional capital invested as frankable dividends for taxation purposes.
Applicants under the FLIC scheme in the current round will be notified directly of the proposed amendments.
CANBERRA
19 March 1999
Contact Officers:
Matthew Guy
Assistant Treasurer's Office
(02) 6277 7360
Jan Wryell
Australian Taxation Office
(02) 6271 6453