Imputation credit for overpaid provisional tax transferred within a group

2011 amendment to Income Tax Act clarifies timing for an imputation credit for overpaid provisional tax transferred within a group.

Sections OB 4(1) and (4) of the Income Tax Act 2007

Key features

Section 112 of the Taxation (Tax Administration and Remedial Matters) Act 2011 amends section OB 4 of the Income Tax Act 2007 to clarify the timing for an imputation credit arising for a company on the transfer of overpaid provisional tax by one company within a wholly owned group of companies to another company in the same group. The timing of this imputation credit is the date the notice of the transfer of the tax is given to the Commissioner.

Detailed analysis

Section MB 33 of the 2004 Act provided that when a company transfers the benefit of its overpaid provisional tax to another company in the same wholly owned group of companies, the transferring company receives a debit to its imputation credit account for the amount of the transferred tax, and the recipient company is treated as having paid the tax and receives a credit for the same amount.

Under the 2004 Act, the date of the debit and credit for this transfer of overpaid provisional tax within a wholly owned group of companies was the date the notice of the transfer was given to the Commissioner.

Section OB 4 is amended to replicate more accurately the effect of the 2004 Act in relation to the timing of an imputation credit arising for a company receiving the benefit of the transfer of overpaid provisional tax from another company in the same wholly owned group of companies.