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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: Australia: Underlying Tax

Documents needed to support the underlying tax claim

The balance sheet and the profit and loss account and any relevant notes to the accounts; the pages of the tax return and the pages showing the tax calculation.

Admissible tax

Payments of franking deficit tax are admissible for credit. The tax payable may be increased by taxes paid in third countries and other credits: if claimed, details and supporting documentation are needed.

Tax consolidation: Section 803A ICTA 1988

The Australian tax consolidation regime, effective from 1st January 2003, brings groups of companies within the provisions of ICTA88\803A so that the relevant profits are the distributable profits shown by the consolidated accounts. Where consolidated accounts have not been prepared, the relevant profits are the aggregate of the distributable profits and losses shown by the accounts of each company in the tax consolidation. Inter-company dividends are ignored.

Section 803A applies to any dividend paid to the UK after the tax consolidation has come into effect even if sourced from earlier years not covered by the tax consolidation. However, in view of the transitional problems that may arise, companies have the option of using the single company basis for those earlier years. In that case, a dividend received by the Australian holding company in a tax consolidation year paid from a subsidiary’s profits arising before the tax consolidation came into effect should be added to the group relevant profits and the associated underlying tax (calculated on the previous basis of the paying company’s own profits and tax) should be added to the group tax. That will ensure that profits and tax do not fall out of account on the transition from a company to a group basis.

See INTM164150 and Tax Bulletin 63.