Regal Estate Ltd (‘REGAL’) owns and operates a major real estate agency in Sydney.
REGAL manages rental properties for owners of investment properties. REGAL
usually charges a specified commission as a percentage of rent for these property
management services. REGAL also sells properties for owners and conducts auctions
for sellers. REGAL also usually charges a specified commission for these services.
The company accountant Arthur is in the process of preparing the income tax return
for the company for the 2021/22 income year, and seeks your advice on the following
matters:
e) During the 2021/22 income year, REGAL made three frankable distributions.
The first distribution ($1 million) is franked at 50%, the second distribution
($2million) is franked at 70%, and the third distribution ($1 million) is franked
at 40%. (Assume a corporate tax rate for imputation purposes of 30%).
Advise REGAL and Arthur regarding the income tax implications arising from
the above facts in relation to the 2021/22 income year. In your answer make
sure you refer to any relevant cases, legislative provisions, tax rulings and
principles of tax law.