Shadow ACT is set against a company's capacity but not so as to
reduce the amount of its liability. It acts to limit the ability to
obtain set-off of unrelieved surplus ACT and ensures that the
surplus is accessed to broadly the same extent as it would have
been under the previous rules.
The amount of shadow ACT that can be set against a company's
liability for an accounting period cannot exceed the amount of
shadow ACT treated as paid in respect of a relevant distribution
made at the end of that period of an amount which, together with
the shadow ACT treated as paid in respect of it, is equal to the
company's profits charged to CT for that period. That is calculated
ignoring any set off of franked investment income or surplus
franked investment income. The approach mirrors that in ICTA88/S239
(2).
