Would you please help with the following questions?
There is a Holding company and Trading company under a dual company structure.
The Holding company owns 100% shares of the Trading company and has no other business activity.
Only the income for the Holding company will be the dividend income if the Trading company pays the franked dividend in the future.
Here are the questions.
- Does the Holding company need to apply for the ABN and TFN in the above circumstance?
- Do we need to lodge the company tax return every year for the Holding company although no dividend income is received?
- Suppose the Holding company receives dividends from the Trading company. Should the Holding company pay the corporate tax on this dividend income?
- There may be small expenses related to the Holding company. Can this be included in the company tax return of the Holding company, e.g., accounting fee, or postage and so on?
Answer
- Having been registered with ASIC, the company is entitled to an ABN – effectively, the client has a choice. There is no requirement for it to have an ABN. As there is the possibility of receiving dividends, inter-entity transactions and additional subsidiaries, a TFN should be applied for. In the event of future tax consolidation and/or GST grouping, the holding company should have both a TFN and ABN.
- A return is not strictly necessary but could be lodged in the event of no income and care taken to ensure records are retained to prepare financial statements (Corp Law requirement). However, this is not best practice, and normally financial statements at the very least are prepared annually.
- This will depend on whether the dividends are franked. Normally only franked dividends are paid, which means the franking credits cover the holding company tax liability.
- Yes, as the holding company expects to receive dividends, these minor expenses will be deemed to be incurred in earning assessable income.