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OB 44: ICA debit on leaving wholly-owned group
or “Tax account adjustment when a company leaves a group”
You could also call this:

“Debit for cancelling units in a managed fund”

If you manage a unit trust or group investment fund, you might have to deal with something called an imputation debit. This happens when your company gets money from cancelling units or investor interests that you bought as part of running the fund.

The amount of this debit is the bigger of two numbers. The first number is the difference between the credits attached to the dividends you got and any imputation debits you already have. The second number is worked out using a special formula that looks at your total dividends, taxable income, and tax situation.

You need to record this debit in your company’s accounts. The date for this is when you file your tax return for the year you got the dividend.

This rule doesn’t apply if you’re an Australian ICA company. It only counts if you bought the units or interests on the same terms as other investors in the fund.

Section OB 41 and section OP 42 are important parts of the law that relate to this. They talk about what happens if you lose shareholder continuity, which can affect your imputation credits.

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Next up: OB 46: ICA transfer from member fund

or “Tax debit when an ICA company transfers money to a master fund”
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Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 45ICA redemption debit

  1. An ICA company has an imputation debit for the amount of a redemption debit.

  2. A redemption debit arises when—

  3. a company that is not an Australian ICA company is—
    1. the manager of a unit trust; or
      1. the trustee or manager of a group investment fund; and
      2. the company derives a dividend on the redemption or cancellation of—
        1. a unit issued by the unit trust; or
          1. an interest of an investor in the group investment fund; and
          2. the company has acquired the unit or interest in the ordinary course of its management activities for the unit trust or group investment fund; and
            1. the unit or interest had been acquired by the company on the same terms as those offered to the investors in the unit trust or group investment fund.

              1. The debit is for the greater of the amounts described in subsections (4) and (6) calculated for the income year in which the company derived the dividend referred to in subsection (2)(b).

              2. The first amount is calculated using the formula—

                credits attached − imputation debits.

                Where:

                • In the formula in subsection (4),—

                • credits attached is the total amount of all imputation credits attached to dividends derived in the circumstances set out in subsection (2) by the company for the income year:
                  1. imputation debits is the total amount of all imputation debits arising for the income year under—
                    1. section OB 41 in the company’s imputation credit account; or
                      1. section OP 42 (Consolidated ICA debit for loss of shareholder continuity) in the imputation credit account of the consolidated imputation group of which the company is part.

                      2. The second amount is calculated using the formula—

                        (total dividends ÷ taxable income) × (tax liability − debits).

                        Where:

                        • In the formula in subsection (6),—

                        • total dividends is the total amount of all dividends derived in the circumstances set out in subsection (2), including imputation credits attached to the dividends:
                          1. taxable income is the taxable income of the company for the income year in which the dividends are derived:
                            1. tax liability is the company’s income tax liability for the income year:
                              1. debits is the imputation credits attached to the dividends that have been cancelled by an imputation debit arising during the income year under—
                                1. section OB 41 in the company’s imputation credit account; or
                                  1. section OP 42 in the imputation credit account of the consolidated imputation group of which the company is part.

                                  2. The table references are as follows:

                                  3. the imputation debit in subsection (1) is referred to in table O2: imputation debits, row 18 (redemption debit):
                                    1. the imputation debit in subsection (5)(b)(i) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity):
                                      1. the imputation debit in subsection (5)(b)(ii) is referred to in table O20: imputation debits of consolidated imputation groups, row 16 (debit for loss of shareholder continuity):
                                        1. the imputation debit in subsection (7)(d)(i) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity):
                                          1. the imputation debit in subsection (7)(d)(ii) is referred to in table O20: imputation debits of consolidated imputation groups, row 16 (debit for loss of shareholder continuity).

                                            1. The debit date is the date on which the company or the group’s nominated company files the return of income for the income year in which the dividend is derived.

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                                            Notes
                                            • Section OB 45(5)(a): amended, on , by section 201(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                            • Section OB 45(7)(a): amended, on , by section 201(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                            • Section OB 45 list of defined terms FDP credit: repealed, on , by section 201(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).