Private ruling: Income tax implications in respect of franked distributions
Date of advice: 20 December 2019
Published: February 2020
Ruling period: 01/07/2019 to 30/06/2024
Date scheme commenced: 01/07/2019

Ruling: Q1: Where the Estate is not fully administered, are you assessable under section 99 or 99A of the Income Tax Assessment Act 1936 (ITAA 1936) on the share of income paid as an interim distribution to the testamentary trust beneficiaries for the years 30 June 2020 to 30 June 2024 (Income Years)? | A1: No | Q2: Do the qualified person provisions in Division 1A of former Part IIIAA of the ITAA 1936 (Division 1A) and paragraph 207-145(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to you in respect of any franked distribution made by XXXX Pty Ltd (XXXX) during the Income Years? | A2: No | Q3: Are you a qualified person for the purposes of Division 1A and paragraph 207-145(1)(a) of the ITAA 1997 in respect of any franked distribution made by XXXX Pty Ltd (XXXX) to the Estate during the Income Years? | A3: Yes | Q4: Are you entitled to a tax offset where you are assessable under section 99 or 99A of the ITAA 1936 on the share of net income from the dividends paid by XXXX and/or XXXX in the event no beneficiary is presently entitled? | A4: Yes

Relevant facts and circumstances: X ordinary shares in Company A; and X ordinary shares in Company B. The creation of various testamentary trusts which came into existence upon the death of the late Mr X, and the allocation of 100% of the Realisation Receipts and Other Receipts (Receipts) from the Company A and Company B shares referred to in clause X between the various testamentary trusts. Each entitlement is expressed as a percentage.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 44(1) | Income Tax Assessment Act 1936 Section 95 | Income Tax Assessment Act 1936 Section 96 | Income Tax Assessment Act 1936 Section 97 | Income Tax Assessment Act 1936 Section 99 | Income Tax Assessment Act 1936 Section 99A | Income Tax Assessment Act 1936 Former Section 160APHH | Income Tax Assessment Act 1936 Former Section 160APHO | Income Tax Assessment Act 1936 Former Section 160APHM | Income Tax Assessment Act 1936 Former Section 160APHD | Income Tax Assessment Act 1936 Former Section 160APHJ | Income Tax Assessment Act 1997 Subsection 207-35(3) | Income Tax Assessment Act 1997 Section 207-45 | Income Tax Assessment Act 1997 Subsection 207-50(4) | Income Tax Assessment Act 1997 Section 207-145 | Income Tax Assessment Act 1997 Section 207-150 | Corporations Act 2001 Subsection 249A(2) | Corporations Act 2001 Section 254H

Reasons for decision: Summary: No. You are not assessable under section 99 or 99A of the ITAA 1936 on the share of income paid as an interim distribution to the testamentary trust beneficiaries for the Income Years. | Detailed Reasoning - Detailed reasoning: X ordinary shares in Company A; and X ordinary shares in Company B. Net income, in relation to a trust estate, means the total assessable income of the trust estate calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions, except deductions under Division 393 of the Income Tax Assessment Act 1997 (Farm management deposits) and except also, in respect of any beneficiary who has no beneficial interest in the corpus of the trust estate, or in respect of any life tenant, the deductions allowable under Division 36 of the Income Tax Assessment Act 1997 in respect of such of the tax losses of previous years as are required to be met out of corpus. Except as provided in this Act, a trustee shall not be liable as trustee to pay income tax upon the income of the trust estate Even though a will may provide beneficiaries with absolute and indefeasible interest in the capital or income of an estate, under State laws those interest cannot crystallize until probate has been granted. In a deceased estate, whether a beneficiary is presently entitled to a share of the income of a trust estate for the purpose of Division 6 of Part III of the Act depends on: a) The stage reached in the administration of the deceased estate. b) The terms of the deceased's will or codicil, trust law and principle enunciated and orders made by the Courts. c) Whether any discretionary payments have been made to the beneficiary by the executor or trustee. ".... until an estate has been fully administered by payment or provision for the payment of funeral and testamentary expenses, death duties, debts, annuities and legacies and the amount of the residue thereby ascertained, the income of the residuary estate is the income of the executors and not of the residuary beneficiaries." "...The only part of an estate which can be made available to satisfy the claims of the beneficiaries is that part which remains after the funeral and testamentary expenses, death duties and debts have been paid or provided for, if necessary out of the whole estate, including any income earned by the estate during the period of realization." During the intermediate stage of administration of a deceased estate (as described in paragraph 6 above), the point may be reached where it is apparent to the executor that part of the net income of the estate will not be required to either pay or provide for debts, etc. The executors in this situation might in the exercise of the executor's discretion, in fact, pay some of the income to, or on behalf of, the beneficiaries. The beneficiaries in this situation will be presently entitled to the income to the extent of the amounts actually paid to them or actually paid on their behalf. The fact that the estate has not been fully administered does not prevent the beneficiaries in this situation from being presently entitled to the income actually paid to, or on behalf of, the beneficiaries. a) an interest in the income from the Receipts which is both vested in interest and vested in possession, and b) a present legal right to demand and receive payment of the income, whether or not the precise entitlement can be ascertained before the end of the relevant year of income and whether or not the trustee has the funds available for immediate payment. | Detailed Reasoning - Question 2: Do the qualified person provisions in Division 1A and paragraph 207-145(1)(a) of the ITAA 1997 apply to you in respect of any franked distribution made by Company A during the Income Years? | Summary: No. The qualified person provisions in Division 1A and paragraph 207-145(1)(a) of the ITAA1997 do not apply to you in respect of any franked distribution made by Company A during the Income Years. | Detailed Reasoning - Detailed reasoning: If held directly - acquired on or after 1 July 1997; or If held indirectly through a trust - acquired after 3pm on 31 December 1997. If any shares or interest in shares held by a person who has died has passed to the executor of the will, or the administrator of the estate, of the dead person, the executor or administrator is taken, for the purpose of this Division, to have acquired the shares at the time when they were acquired by the dead person. In calculating the number of days for which the executor or administrator is taken to have continuously held the shares or interest, any days in respect of which the person materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the executor or administrator is taken to have held the shares or interest. While there is a change in the form of the original shares, there is no change in their beneficial ownership... | Detailed Reasoning - Question 3: Are you a qualified person for the purposes of Division 1A and paragraph 207-145(1)(a) of the ITAA 1997 in respect of any franked distribution made by Company B to the Estate during the Income Years? | Summary: Yes. You are a qualified person for the purposes of Division 1A and paragraph 207-145(1)(a) of the ITAA 1997 in respect of any franked distribution made by Company B to the Estate during the Income Years. | Detailed Reasoning - Detailed reasoning: If held directly - acquired on or after 1 July 1997; or If held indirectly through a trust - acquired after 3pm on 31 December 1997. If any shares or interest in shares held by a person who has died has passed to the executor of the will, or the administrator of the estate, of the dead person, the executor or administrator is taken, for the purpose of this Division, to have acquired the shares at the time when they were acquired by the dead person. In calculating the number of days for which the executor or administrator is taken to have continuously held the shares or interest, any days in respect of which the person materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the executor or administrator is taken to have held the shares or interest. While there is a change in the form of the original shares, there is no change in their beneficial ownership........ A taxpayer who has held shares or an interest in shares on which a dividend has been paid is a qualified person in relation to the dividend if: a) Where neither the taxpayer nor an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the primary qualification period in relation to the dividend; or b) Where the taxpayer or an associate of the taxpayer has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend - the taxpayer has satisfied subsection (2) in relation to the secondary qualification period in relation to the dividend. A taxpayer who has held shares or an interest in shares on which a dividend has been paid satisfies this subsection in relation to a qualification period in relation to the shares or interest if, during the period: (a) Where the taxpayer held the shares - the taxpayer held the shares for a continuous period (not counting the day on which the taxpayer acquired the shares or, if the taxpayer has disposed of the shares, the day on which the disposal occurred) of not less than: (i) if the shares are not preference shares - 45 days; or (ii) if the shares are preference shares - 90 days; In calculating the number of days for which the taxpayer continuously held the shares or interest, any days on which the taxpayer has materially diminished risks of loss or opportunities for gain in respect of the shares or interest are to be excluded, but the exclusion of those days is not taken to break the continuity of the period for which the taxpayer held the shares of interest. In relation to a taxpayer in relation to shares or an interest in shares, means the period beginning on the day after the day on which the taxpayer acquired the shares or interest and ending: (a) if the shares are not preference shares - on the 45th day after the day on which the shares or interest became ex dividend; or (b) if the shares are preference shares - on the 90th day after the day on which the shares or interest became ex dividend. 4.19 The holding period rule is a once-and-for-all test. It sets an initial threshold which only has to be crossed once. Therefore, once a taxpayer is a qualified person in relation to a dividend or distribution by virtue of the fact that the taxpayer has held the relevant shares or interest for more than 45 days, the taxpayer is taken to be a qualified person for the purposes of the rule in relation to future dividends or distributions paid on those shares or interest. | Detailed Reasoning - Question 4: Are you entitled to a tax offset where you are assessable under section 99 or 99A of the ITAA 1936 on the share of net income from the dividends paid by Company A and or Company B in the event no beneficiary is presently entitled? | Summary: Yes. You are entitled to a tax offset where you are assessable under section 99 or 99A on the share of net income from the dividends paid by Company A and or Company B in the event no beneficiary is presently entitled. | Detailed Reasoning - Detailed reasoning: a. the distribution is made to a partnership or the trustee of a trust; and b. the benefit is received either directly or through other interposed partnerships or trusts. An entity to whom a *franked distribution *flows indirectly in an income year is entitled to a *tax offset for that income year that is equal to its *share of the *franking credit on the distribution, if it is: a) an individual; or b) a *corporate tax entity when the distribution flows indirectly to it; or c) the trustee of a trust that is liable to be assessed on a share of, or all or a part of, the trust's *net income under section 98, 99 or 99A of the Income Tax Assessment Act 1936 for that income year; or d) the trustee of a *complying superannuation fund, a *non-complying superannuation fund, a *complying approved deposit fund, a *non-complying approved deposit fund or a *pooled superannuation trust in relation to that income year. (a) during that income year, the distribution is made to the trustee, or flows indirectly to the trustee as a partner or beneficiary because of a previous application of subsection (2) or (3); and (b) the trustee is liable or, but for another provision in this Act, would be liable, to be assessed in respect of an amount (the share amount ) that is: (i) a share of the trust's *net income for that income year under section 98 of the Income Tax Assessment Act 1936; or (ii) all or a part of the trust's net income for that income year under section 99 or 99A of that Act; (whether or not the share amount becomes assessable income in the hands of the trustee); and (c) the trustee ' s *share of the distribution under section 207-55 is a positive amount (whether or not the trustee actually receives any of that share).

Relevant facts and circumstances: On XX/XX/XXXX, Mr X passed away. | The legal ownership of all of Mr X's assets was subsequently passed onto the Estate. | Company A was incorporated by the late Mr X on XX/XX/XXXX. All of the ordinary shares in Company A were owned by Mr X until the date of his death. Once probate was granted, the ordinary shares were transferred to the Estate. | The shares in Company B were acquired by the late Mr X on XX/XX/XXXX by virtue of the vesting of the X Trust (of which the late Mr X was a beneficiary). Once probate was granted, the ordinary shares of Company B were transferred to the Estate. | Mr X satisfied the qualified person test in former section 160APHO of the ITAA 1936 in relation to the Company B shares. | By resolution dated XX/XX/XXXX, in compliance with subsection 249A(2) and section 254H of the Corporations Act 2001 , the ordinary shares were split such that Company A and Company B each have X ordinary shares on issue. This splitting was done in accordance with the will for the purposes of the distribution of these assets. | On XX/XX/XXXX, probate of the last Will and Testament dated XX/XX/XXXX of Mr X was granted to Mr Y and Mr Z, the executors appointed under the will (the Executors). | Clause X of the will provides for: | The Estate is a trust for the purpose of the ITAA 1936 and ITAA 1997. | The Estate is a resident trust estate. | The Executors have determined that the assets of the Estate (including the shares in and/or assets of Company A and Company B) are to be realised via sale and the proceeds are to be distributed to the beneficiaries in accordance with the will. | The Estate has not reached the point of full administration and is in the 'intermediate stage of administration'. This is due to fact that the Executors have determined that all assets of the Estate are to be realised via sale before distribution to the beneficiaries and it is expected that there will be various debts payable by the Estate in undertaking this process. | As part of the realisation of the Company A and Company B assets, certain underlying assets and businesses owned by Company A or Company B may be sold. Following this, a franked dividend will be paid from Company A and/or Company B to the Estate to facilitate the distribution of the proceeds of such sales to the various testamentary trusts in accordance with the will. This will be done via a distribution of the income of the Estate (inclusive of the franked distributions paid by Company A or Company B) to the testamentary trusts. | The amounts to be distributed will comprise mainly franked dividends however there is the possibility of small amounts of interest. All of the amounts distributed will be attributable to the Realisation Receipts and distributed in accordance with Clause X of the will. | The Estate will be in the intermediate stage of administration at the time that franked dividends are paid by Company A or Company B. | The Executors of the Estate will not have made, be under an obligation to make, nor be liable to make, a related payment in respect of any franked distribution made by Company B to the Estate during the Income Year. | The net income of the Estate for the relevant year is greater than zero. | Due to the quantum of the Estate's assets, no part of the net income of the Estate (including that part that constitutes an interim dividend paid by Company A or Company B) will be required to pay or provide for debts of the Estate. | The Estate will not have any 'materially diminished' risk as described in former section 160APHM is respect of the Company A and Company B shares on or prior to any dividend being paid by Company A or Company B during the Income Years. | There have been no short positions in relation to the Company A and Company B shares for the Estate as defined in former subsection 160APHJ(3) of the ITAA 1936 since the shares were transferred to the Estate. | The franked distributions made by Company A and Company B to the Estate during the Income Year will not occur in one or more of the circumstances listed in paragraphs (b) to (db) of subsection 207-145(1) of the ITAA 1997. | Question 1: Where the Estate is not fully administered, are you assessable under section 99 or 99A of the ITAA 1936 on the share of income paid as an interim distribution to the testamentary trust beneficiaries for the years 30 June 2020 to 30 June 2024 (Income Years)? | On XX/XX/XXXX, Mr X passed away. The legal ownership of all of his assets was passed onto the Estate. These assets included: | Division 6 of Part III of the ITAA 1936 sets out the basic income tax treatment of the net income of the trust estate. | Net income is defined under section 95 of the ITAA 1936 as follows: | The net income of the trust for the relevant years is from interest and dividends. | Subsection 44(1) of the ITAA 1936 provides that the assessable income of a shareholder in a company includes dividends that are paid to the shareholder by the company out of profits derived by it from any source. | Section 96 of the ITAA 1936 states that: | A trustee will be assessable under section 99 or section 99A of the ITAA 1936 if there is no beneficiary presently entitled to any part of the income of the trust estate, or where there is a part of that income to which no beneficiary is so entitled. | Paragraph 4 of Tax Ruling IT 2622 Income tax: present entitlement during the stages of administration of deceased estates (IT 2622) states that: | In respect of the Estate, probate of the will was granted on XX/XX/XXXX. | IT 2622 provides the Commissioner's view on present entitlement during the stages of administration of deceased estates. Paragraph 7 of IT 2622 states that: | FCT v Whiting (1943) 68 CLR 1999; 7 ATD 179 deals with present entitlement under a trust arising during the course of administration of an estate. The High Court considered that in order to ascertain whether a present entitlement exists it is necessary to look at the state of administration of the trust estate. In their joint judgment, Latham C J and Williams J stated | Paragraph 14 of IT 2622 continues to state that: | The Estate has not reached the point of full administration and is in the 'intermediate stage of administration'. The Executors have determined that all assets of the Estate are to be realised via sale before distribution to the beneficiaries and it is expected that there will be various debts payable by the Estate in undertaking this process. Due to the expected timeframe required to complete this realisation process, the Executors anticipate that the Estate will not be fully administered at the time that certain franked dividends are paid by Company A or Company B. | As a result, the fact that the Estate has not been fully administered when the interim distributions are made to the testamentary trusts will not prevent the beneficiaries being presently entitled to the income of the trust paid to them. | The other factors mentioned in IT 2622 that determine whether a beneficiary of a deceased estate is presently entitled to a share of the income includes; the terms of the deceased's will, trust law and orders made by the Courts and whether any discretionary payments have been made to the beneficiary by the executor or trustee. | The testamentary trusts will be presently entitled to the interim distribution if the terms of the will and subsequent court orders provide: | An interest is vested in possession when it gives its holder a right of present enjoyment, whereas an interest is vested in interest if it gives its holder a present right to future enjoyment. | An interest is indefeasible if it cannot be defeated by the actions of one or more persons or by the occurrence of one or more subsequent events. | Clause X of the will sets out the testamentary trusts' entitlement to the Receipts from the Company A and Company B shares as altered by clause X to provide for the gift as set out in clause X. Their interest in the income from the Receipts is indefeasible as it is not dependant on any person, act or event. | The income from the Receipts is legally available for distribution as the Estate will hold sufficient capital to pay debts incurred as part of its winding up. | Accordingly, where the Executors have made an interim distribution from the Receipts in accordance with the will, the testamentary trusts are presently entitled to their share of the income from that distribution. | Having regard to these circumstances, the Estate will hold sufficient capital to pay debts incurred as part of its winding up, and the beneficiaries are presently entitled to all the net income from the interim distributions, therefore no amounts from the Receipts are to be assessed to the trustee under section 99 or 99A of the ITAA 1936. An interim distribution of the Receipts during the intermediate stage of administration will therefore not be assessed to the Executors of the Estate under section 99 or section 99A of the ITAA 1936. | Division 207 of the ITAA 1997 sets out the consequences of an entity receiving directly or indirectly a franked distribution from a corporate tax entity. Generally an entity receiving a franked distribution will be required to include an amount equal to the franking credit in their assessable income and be entitled to a tax offset equal to the same amount. | Section 207-145 of Subdivision 207-F of the ITAA 1997 applies where a franked distribution is made to an entity. | Under subsection 207-145(1) of the ITAA 1997, if an entity to whom a franked distribution is made is 'not a qualified person in relation to the distribution for the purposes of Division 1A.' the amount of franking credit received on the distribution is not included in their assessable income, nor can they claim a tax offset equal to the franking credit; and if the distribution flows indirectly through the entity to another entity - subsection 207-35(3) and section 207-45 of the ITAA 1997 do not apply to that other entity. | The very wording of section 207-145 of the ITAA 1997 makes it clear that regard is to be had to the rules in Division 1A in determining whether a person is a qualified person for the purpose of these provisions in respect of a franked distribution. | Though Part IIIAA of the ITAA 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A in determining whether an entity is a qualified person, irrespective of whether the distribution is made directly or indirectly to the entity on or after 1 July 2002. | Item 25 of Schedule 4 of the Taxation Laws Amendment (No.2) 1999 (93 of 1999) amends Division 1A to apply to shares and interests in shares acquired on or after 1 July 1997 unless an exception occurred. | The qualified person provisions of Division 1A applied to shares that were: | Former section 160APHH of the ITAA 1936 deals with other special provisions relating to acquisition or disposal of shares or interests in shares. | Former subsection 160APHH(4) of the ITAA 1936 deals with shares or interest passing to executor or administrator and states: | The legal ownership of the assets owned by Mr X was passed onto the Estate at the time he died. The assets included the X ordinary shares in Company A. | By resolution dated XX/XX/XXXX, in compliance with subsection 249A(2) and section 254H of the Corporations Act 2001 , the ordinary shares were split such that Company A has X ordinary shares on issue. This splitting was done in accordance with the will for the purposes of the distribution of these assets. | As inferred in the paragraph 4.34 of the Explanatory Memorandum to the Tax Laws Amendment Act (No.2) 1999), the splitting of shares is not considered to be a new acquisition of shares. Further Taxation Determination TD 2000/10 Income tax: capital gains: what are the CGT consequences for a shareholder if a company converts its shares into a larger or smaller number of shares? (TD 2000/10) provides that: | Based on the facts provided, including that the parcel of shares have been split, the shares are taken to be acquired by the Estate at the same time Mr X acquired them, being XX/XX/XXXX. As this date is prior to 1 July 1997, the qualified person provisions under paragraph 207-145(1)(a) have no application. | Though Part IIIAA of the ITAA 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A in determining whether an entity is a qualified person for the purpose of the rules contained in the Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. | The shares in Company B were acquired by the late Mr X on XX/XX/XXXX by virtue of the vesting of the X Trust (of which the late Mr X was a beneficiary). Once probate was granted, the X ordinary shares of Company B were transferred to the Estate. | Former subsection 160APHH(4) of the ITAA 1936 deals with shares or interest passing to the executor or administrator and states: | By resolution dated XX/XX/XXXX, in compliance with subsection 249A(2) and section 254H of the Corporations Act 2001 , the ordinary shares were split such that Company B has X ordinary shares on issue. This splitting was done in accordance with the will for the purposes of the distribution of these assets. | As inferred in the paragraph 4.34 of the Explanatory Memorandum to the Tax Laws Amendment Act (No.2) 1999), the splitting of shares is not considered to be a new acquisition of shares. Further TD 2000/10 provides that: | Based on the facts provided, including that the parcel of shares have been split, there would be no change to the date upon which the shares were acquired and this date would be the date the Executor is taken to have acquired the shares. As this date is XX/XX/XXXX the qualified person provisions have application and it is therefore necessary it is therefore necessary to consider whether the entity is a qualified person as required by paragraph 207-145(1)(a) of the ITAA 1997. | Under former subsection 160APHO(1) of the ITAA 1936: | The Executors of the Estate will not have made, be under an obligation to make, nor be liable to make, a related payment in respect of any franked distribution made by Company B to the Estate during the Income Year, therefore the primary qualification period applies for the purposes of former subsection 160APHO(2) of the ITAA 1936. | Under former subsection 160APHO(2) of the ITAA 1936: | Former subsection APHO(3) of the ITAA 1936 states that: | Former section 160APHD of the ITAA 1936 defines primary qualification period as: | Paragraph 4.19 of the Explanatory Memorandum to the Tax Laws Amendment Act (No.2) 1999) states that: | The Estate's primary qualification period commences on the day after they are taken to have acquired the Company B shares. As the Estate is taken to have acquired the shares on the same date as Mr X, the days that Mr X held the shares at risk are counted. | Mr X would have held the shares at risk for at least 45 days during his period of ownership as he satisfied the qualified person test in former section 160APHO of the ITAA 1936 in relation to the Company B shares. Therefore the Estate will also have held the Company B shares at risk for at least 45 days since the date they were taken to have acquired them. | Having regard to the circumstances and the facts provided the Executors of the Estate will be qualified persons for the purposes of Division 1A and paragraph 207-145(1)(a) of the ITAA 1997 in respect of any potential franked distribution made by Company B to the Estate during the income year. | Subdivision 207-B of the ITAA 1997 deals with franked distributions received through certain partnerships and trustees. This subdivision deals with an entity that receives a benefit of a franked distribution where: | Section 207-45 of the ITAA 1997 deals with tax offsets where the distribution flows indirectly to an entity. Section 207-45 of the ITAA 1997 states that: | Under subsection 207-50(4) of the ITAA 1997 a franked distribution flows indirectly to the trustee of a trust in an income year if, and only if: | As the distribution is made to the trustee it is taken under subsection 207-50(4) of the ITAA 1997 to have been made indirectly thereby satisfying the requirement under paragraph 207-45(c) of the ITAA 1997 for that income year. Therefore in the event that the executors of the estate are assessed on the franked distribution as the ultimate recipient they will be entitled to a franking credit under section 207-45 of the ITAA 1997. | Section 207-145 of the ITAA 1997 will not impact on your entitlement to the tax offset as none of the circumstances listed in paragraphs (b) to (db) of this section will occur. The qualified person rule in paragraph 207-145(1)(a) of the ITAA 1997 has no application in respect to the Company A shares as per question 2. The qualified person rule in paragraph 207-145(1)(a) of the ITAA 1997 has been satisfied in respect to the Company B shares as per question 3. For these reasons the entitlement to the tax offset will not be limited under paragraph 207-145(1)(f) of the ITAA 1997.