Income Tax Assessment Act 1997

s 197-30 — Exclusion for transfers made in connection with demutualisations of non ‑ insurance etc. companies

(1) Subject to subsection (2), this Division does not apply to the transferred amount if: (a) the amount is transferred in connection with a demutualisation of the company; and (b) Division 326 in Schedule 2H to the Income Tax Assessment Act 1936 applies to the demutualisation; and (c) the transfer occurs within the limitation period in relation to the demutualisation (see subsection 326 ‑ 20(3) in that Schedule). (2) If the sum of: (a) the transferred amount; and (b) any other amounts that were previously transferred to the company’s * share capital account, from another account of the company, in connection with the demutualisation; exceeds the total capital contributions amount described in whichever of subsections (3) and (4) applies, subsection (1) does not stop this Division from applying to so much of the transferred amount as equals the lesser of the transferred amount and the amount of the excess. Note: If there are several transfers of amounts to the company’s share capital account in connection with the demutualisation, this section must be applied separately in relation to each transferred amount, in the order in which the transfers are made. (3) If the company was not formed by the merger of 2 or more mutual entities, the total capital contributions amount referred to in subsection (2) is the sum of all the capital amounts: (a) that were contributed to the company by * members of the company before its demutualisation; and (b) in respect of which deductions are not allowable to the members; and (c) that were not payments for goods or services provided by the company. (4) If the company was formed by the merger of 2 or more mutual entities, the total capital contributions amount referred to in subsection (2) is the sum of: (a) all the capital amounts: (i) that were contributed to the company, before its demutualisation, by persons who became * members of the company at or after the time when the merger took place; and (ii) in respect of which deductions are not allowable to those members; and (iii) that were not payments for goods or services provided by the company; and (b) the * market values, at the time of the merger, of the entities that merged to form the company, as determined by a qualified valuer.

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 197-35 — Exclusion for transfers made in connection with demutualisations of insurance etc. companies

(1) Subject to subsection (2), this Division does not apply to the transferred amount if: (a) the amount is transferred in connection with the demutualisation of a company; and (b) the demutualisation is implemented in accordance with a demutualisation method specified in Division 9AA of Part III of the Income Tax Assessment Act 1936 ; and (c) the transfer occurs within the listing period in relation to the demutualisation (see subsection 121AE(6) of that Act); and (d) the company (the issuing company ) to whose * share capital account the amount is transferred is: (i) if the demutualisation method is the method specified in section 121AF or 121AG of the Income Tax Assessment Act 1936 —the demutualising company; or (ii) if the demutualisation method is the method specified in section 121AH, 121AI, 121AJ, 121AK or 121AL of the Income Tax Assessment Act 1936 —the company issuing the ordinary shares referred to in that section. (2) If the sum of: (a) the transferred amount; and (b) all amounts that were previously transferred to the issuing company’s * share capital account, from another account of the company, in connection with the demutualisation; and (c) all amounts that were previously transferred to the issuing company’s retained profit account in connection with the demutualisation; exceeds the listing day company valuation amount (see subsection (3)), subsection (1) does not stop this Division from applying to so much of the transferred amount as equals the lesser of the transferred amount and the amount of the excess. Note: If there are several transfers of amounts to the issuing company’s share capital account, this section must be applied separately in relation to each transferred amount, in the order in which the transfers are made. (3) The listing day company valuation amount has the same meaning as it has for the purposes of table 1 in section 121AS of the Income Tax Assessment Act 1936 , as that table applies in relation to the demutualising company (see note 3 to that table).

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 197-37 — Exclusion for transfers made in connection with demutualisations of private health insurers

(1) Subject to subsection (2), this Division does not apply to the transferred amount if: (a) the amount is transferred in connection with a demutualisation of a company; and (b) Division 315 (about demutualisations of private health insurers) applies to the demutualisation; and (c) the company (the issuing company ) to whose * share capital account the amount is transferred is either: (i) the demutualising health insurer; or (ii) the company mentioned in subparagraph 315 ‑ 85(1)(a)(iii) issuing shares that are assets covered by section 315 ‑ 85 ( demutualisation assets ). (2) Subsection (1) does not stop this Division from applying to so much, if any, of the transferred amount as exceeds the sum of the amounts worked out under subsection (3) for each demutualisation asset that is a share issued: (a) by the issuing company under the demutualisation; and (b) to an entity that is either: (i) covered by section 315 ‑ 90 (about participating policy holders); or (ii) the trustee of a trust covered by Subdivision 315 ‑ C (about the lost policy holders trust). (3) The amount worked out under this subsection for a share is: (a) the * market value of the share on the day it is issued; or (b) if the share is in a company covered by subparagraph 315 ‑ 85(1)(a)(iii) that owns other assets in addition to the shares in the demutualising health insurer—worked out using the method statement in subsection 315 ‑ 210(2).

Amendment history: Inserted by No 97 of 2008, effective Sch 1 (items 3–12) and Sch 3 (items 44–173, 189): 3 Oct 2008 (s 2(1) items 2, 3–5)

s 197-38 — Exclusion for transfers connected with demutualisations of friendly society health or life insurers

(1) Subject to subsection (2), this Division does not apply to the transferred amount if: (a) the amount is transferred in connection with a demutualisation of a company; and (b) Division 316 (about demutualisations of friendly society health and life insurers) applies in relation to the demutualisation; and (c) the company (the issuing company ) to whose * share capital account the amount is transferred is either: (i) the * friendly society described in that Division; or (ii) the company that owns all the shares in the friendly society. (2) Subsection (1) does not stop this Division from applying to so much, if any, of the transferred amount as exceeds the sum of the * cost bases of * shares in the issuing company that: (a) are demutualisation assets (see section 316 ‑ 110); and (b) are issued to an entity covered by section 316 ‑ 115. Note: Section 316 ‑ 115 identifies entities connected directly or indirectly with the friendly society and affected by the special cost base rules in section 316 ‑ 105. (3) For the purposes of subsection (2), work out the * cost base of a * share on the day on which it is issued, taking account of section 316 ‑ 105.

Amendment history: Inserted by No 88 of 2009, effective s. 4, Schedule 3 (items 1, 5–23), Schedule 4 (items 2–5) and Schedule 5 (items 113–204, 237, 238, 258, 282, 319–341, 344): 18 Sept 2009 Schedule 2 (items 4–15, 25–27, 30, 31): 1 Oct 2009 Schedule 2 (item 23): 1 Jan 2010

s 197-40 — Exclusion for post ‑ demutualisation transfers relating to life insurance companies

(1) Subject to subsection (2), this Division does not apply to the transferred amount if: (a) a * life insurance company (the demutualised company ) has demutualised; and (b) the demutualisation was implemented in accordance with a demutualisation method specified in Division 9AA of Part III of the Income Tax Assessment Act 1936 ; and (c) the amount is transferred after the end of the listing period in relation to the demutualisation (see subsection 121AE(6) of that Act); and (d) the company transferring the amount to its * share capital account is either: (i) the demutualised company (whichever demutualisation method was used); or (ii) if the demutualisation method was the method specified in section 121AH, 121AI, 121AJ, 121AK or 121AL of the Income Tax Assessment Act 1936 —the company (the issuing company ) that issued the ordinary shares referred to in that section; and (e) if subparagraph (d)(i) applies—the following conditions are satisfied in relation to the transferred amount: (i) the amount is transferred from an account of the demutualised company consisting of shareholders’ capital (within the meaning of the Life Insurance Act 1995 ) in relation to a statutory fund (within the meaning of that Act); (ii) the amount was part of such an account at the time of the demutualisation; and (f) if subparagraph (d)(ii) applies—the amount is transferred from a capital reserve created at the time of or in connection with the demutualisation. (2) If the sum of: (a) the transferred amount; and (b) all amounts that were previously transferred to the demutualised company’s * share capital account, from another account of the demutualised company, as described in subsection (1); and (c) if the demutualisation method was the method specified in section 121AH, 121AI, 121AJ, 121AK or 121AL of the Income Tax Assessment Act 1936 —all amounts that were previously transferred to the issuing company’s share capital account, from another account of the issuing company, as described in subsection (1); and (d) all amounts that were previously transferred, in connection with the demutualisation, to the share capital account of the issuing company (within the meaning of section 197 ‑ 35) as described in subsection 197 ‑ 35(1), or to its retained profit account as described in paragraph 197 ‑ 35(2)(c); exceeds the listing day company valuation amount (see subsection (3)), subsection (1) does not stop this Division from applying to so much of the transferred amount as equals the lesser of the transferred amount and the amount of the excess. Note: If there are several transfers of amounts to the share capital account of the demutualised company or the issuing company, this section must be applied separately in relation to each transferred amount, in the order in which the transfers are made. (3) The listing day company valuation amount has the same meaning as it has for the purposes of table 1 in section 121AS of the Income Tax Assessment Act 1936 , as that table applies in relation to the demutualised company (see note 3 to that table).

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 197-42 — Exclusion for exploration credits

This Division does not apply to the transferred amount if: (a) the company transferring the amount is a * greenfields minerals explorer; and (b) the amount is transferred in connection with the creation of * exploration credits.

Amendment history: Inserted by No 21 of 2015, effective s 4 and Sch 6 (items 1, 2, 16–25, 73): 19 Mar 2015 (s 2(1) items 1, 7–11, 13) Sch 1 (items 1–17, 49), Sch 3 and Sch 7 (items 13–21): 20 Mar 2015 (s 2(1) items 2, 4, 15) Sch 4 (items 1–5, 9–17): 1 July 2015 (s 2(1) item 5) Sch 6 (items 51–59, 74–79): never commences (s 2(1) items 12, 14)

s 197-45 — A franking debit arises in relation to the transfer

(1) A * franking debit arises in a company’s * franking account if an amount (the transferred amount ) to which this Division applies is transferred to the company’s * share capital account. The debit arises immediately before the end of the * franking period in which the transfer of the amount occurs. (2) The amount of the * franking debit is calculated in accordance with the formula: where: applicable franking percentage means: (a) if, before the debit arises, the * benchmark franking percentage for the * franking period in which the transfer of the amount occurs has already been set by section 203 ‑ 30—that percentage; or (b) otherwise—100%. applicable gross ‑ up rate means the company’s * corporate tax gross ‑ up rate for the income year in which the franking debit arises.

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3) | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19)

s 197-50 — The share capital account becomes tainted (if it is not already tainted)

(1) A company’s * share capital account becomes tainted when an amount to which this Division applies is transferred to the account, if, at the time of the transfer, the account is not already tainted (because of the application of this section in relation to a previous transfer). Note: If a company’s share capital account is tainted, then a distribution from the account is taxed as a dividend in the hands of the shareholder. This is because a tainted share capital account does not count as a share capital account for the purposes of paragraph (d) of the definition of dividend in subsection 6(1) of the Income Tax Assessment Act 1936 (see subsection 975 ‑ 300(3) of this Act). However, although the distribution is taxed as a dividend, the company cannot pass on to the shareholder the benefit of the tax it has paid, because a distribution from a share capital account (whether or not tainted) is unfrankable (see paragraphs 202 ‑ 45(e) and 975 ‑ 300(3)(ba) of this Act). (2) The * share capital account remains tainted until the company chooses to untaint the account (see section 197 ‑ 55). Note: If, after a choice to untaint is made, the company’s share capital account becomes tainted again, the account remains tainted until a fresh choice to untaint is made. (3) The tainting amount , for a company’s * share capital account that is * tainted at a particular time, means the sum of: (a) the amount transferred to the company’s share capital account that most recently caused the account to become tainted; and (b) any other amounts to which this Division applies that have been transferred to the company’s share capital account since the transfer referred to in paragraph (a) and before the particular time.

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3) | Amended by No 79 of 2007, effective Schedule 1 (items 28, 29, 39–42, 43(1), (6)), Schedules 3, 4, Schedule 6 (items 3–8), Schedule 9 (items 14–26, 30, 34) and Schedule 10 (items 10–13, 32): Royal Assent Schedule 8 (items 2, 12–25, 26(1)–(3)): 1 July 2007

s 197-55 — Choosing to untaint a tainted share capital account

(1) A company with a * share capital account that is * tainted may make a choice in the * approved form given to the Commissioner to untaint the account. (2) The choice can be made at any time, but cannot be revoked. Note: The choice has no effect in relation to a subsequent tainting of the share capital account that occurs after the choice is made.

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 197-60 — Choosing to untaint—liability to untainting tax

Definitions (1) For the purpose of this section: (a) a company whose * share capital account is * tainted is a company with only lower tax members in relation to the tainting period if, throughout the tainting period, all * members of the company were covered by one, or a combination of 2 or more, of the following subparagraphs: (i) other companies; (ii) * complying superannuation entities; (iii) foreign residents; and (b) a company whose share capital account is tainted is a company with higher tax members in relation to the tainting period if it is not a company with only lower tax members in relation to the tainting period. For this purpose, the tainting period is the period beginning when the share capital account most recently became tainted and ending when the company chooses to untaint the account. Liability to untainting tax (2) A company that chooses to untaint its * share capital account is liable to pay tax, known as untainting tax , equal to the amount calculated in accordance with the formula: where: applicable tax amount has the meaning given by subsection (3). section 197 ‑ 45 franking debits means the total * franking debits arising under section 197 ‑ 45 because of the transfer of the amounts that made up the * tainting amount at the time of the choice. section 197 ‑ 65 franking debits means the total (if any) * franking debits arising under section 197 ‑ 65 because of the choice to untaint. Note: The payment of untainting tax does not give rise to a franking credit. (3) In subsection (2), the applicable tax amount is the amount calculated in accordance with the formula: where: applicable tax rate means: (a) for a company with only lower tax members in relation to the tainting period—the company’s * corporate tax rate for imputation purposes for the income year in which the choice is made; or (b) for a company with higher tax members in relation to the tainting period—the sum of: (i) the maximum rate specified in column 2 of the table in Part I of Schedule 7 to the Income Tax Rates Act 1986 that applies for the income year in which the choice is made; and (ii) 3%. Note: The 3% referred to in subparagraph (b)(ii) relates to rates of Medicare levy and surcharge. notional franking amount has the meaning given by subsection (4). (4) In subsection (3), the notional franking amount is the amount calculated in accordance with the formula: where: applicable gross ‑ up rate means the company’s * corporate tax gross ‑ up rate for the income year in which the choice is made. Temporary budget repair levy (5) If the income year in which the choice is made corresponds to a temporary budget repair levy year (within the meaning of section 4 ‑ 11 of the Income Tax (Transitional Provisions) Act 1997 ), increase the applicable tax rate calculated under subsection (3) by 2 percentage points.

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3) | Amended by No 49 of 2014, effective Sch 1: 25 June 2014 (s 2(1) item 2) Remainder: 25 June 2014 (s 2(1) item 1) | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19)

s 197-65 — Choosing to untaint—further franking debits may arise

When this section applies (1) This section applies if: (a) a company chooses to untaint its * share capital account; and (b) the applicable franking percentage (within the meaning of subsection (3)) is higher than the percentage that was the * benchmark franking percentage in relation to the * franking period in which the transfer of an amount (the transferred amount ) that is, or is part of, the * tainting amount occurred. Note: If paragraph (b) is satisfied in relation to 2 or more amounts, this section is to be applied separately in relation to each of those amounts (so a separate franking debit will arise in relation to each of those amounts). Franking debit arises in relation to making the choice (2) A * franking debit arises in the company’s * franking account in relation to the transferred amount. The debit arises immediately before the end of the * franking period in which the choice to untaint is made. (3) The amount of the * franking debit is the amount by which the amount calculated in accordance with the following formula exceeds the amount of the franking debit that arose under section 197 ‑ 45 in relation to the transferred amount: where: applicable franking percentage means: (a) if, before the debit arises, the * benchmark franking percentage for the * franking period in which the choice to untaint is made has already been set by section 203 ‑ 30—that percentage; or (b) otherwise—100%. applicable gross ‑ up rate means the company’s * corporate tax gross ‑ up rate for the income year in which the franking debit arises.

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3) | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19)

s 197-70 — Due date for payment of untainting tax

* Untainting tax is due and payable at the end of 21 days after the end of the * franking period in which the choice to untaint was made. Note: For provisions about collection and recovery of untainting tax, see Part 4 ‑ 15 in Schedule 1 to the Taxation Administration Act 1953 .

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 197-75 — General interest charge for late payment of untainting tax

If any of the * untainting tax that a company is liable to pay remains unpaid 60 days after the day by which it is due to be paid, the company is liable to pay the * general interest charge on the unpaid amount for each day in the period that: (a) started at the beginning of the 60th day after the day by which the untainting tax was due to be paid; and (b) ends at the end of the last day on which, at the end of the day, any of the following remains unpaid: (i) the untainting tax; (ii) general interest charge on any of the untainting tax.

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 197-80 — Notice of liability to pay untainting tax

(1) The Commissioner may give a company, by post or otherwise, a notice specifying: (a) the amount of any * untainting tax that the Commissioner has ascertained is payable by the company; and (b) the day on which that tax became or will become due and payable. Effect of notice on liability etc. (2) Subject to section 197 ‑ 85, the amount of the liability of a company to * untainting tax, and the due date for payment of the tax, are not dependent on, or in any way affected by, the giving of a notice. Amendment of notice (3) The Commissioner may at any time amend a notice. An amended notice is a notice for the purposes of this section. Inconsistency between notices (4) If there is an inconsistency between notices that relate to the same subject matter, the later notice prevails to the extent of the inconsistency. Objections (5) A company that is dissatisfied with a notice made in relation to the company may object against the notice in the manner set out in Part IVC of the Taxation Administration Act 1953 .

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 197-85 — Evidentiary effect of notice of liability to pay untainting tax

(1) The production of: (a) a notice given under section 197 ‑ 80; or (b) a document that is signed by the Commissioner and appears to be a copy of such a notice; is conclusive evidence that: (c) the notice was duly given; and (d) the amount of * untainting tax specified in the notice became due and payable by the company to which it was given on the day specified in the notice. (2) Subsection (1) does not apply in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the review. Income Tax Assessment Act 1997 No. 38, 1997 Compilation No. 266 Compilation date: 1 July 2026 Includes amendments: Act No. 17, 2025, Act No. 57, 2025, Act No. 49, 2026 and Act No. 58, 2026 This compilation is in 12 volumes Volume 1: Chapter 1, Part 1 ‑ 1 to Chapter 2, Part 2 ‑ 5 sections 1 ‑ 1 to 36 ‑ 55 Volume 2: Chapter 2, Part 2 ‑ 10 to Chapter 2, Part 2 ‑ 20 sections 40 ‑ 1 to 67 ‑ 30 Volume 3: Chapter 2, Part 2 ‑ 25 to Chapter 3, Part 3 ‑ 1 sections 70 ‑ 1 to 121 ‑ 35 Volume 4: Chapter 3, Part 3 ‑ 3 to Chapter 3, Part 3 ‑ 5 sections 122 ‑ 1 to 197 ‑ 85 Volume 5: Chapter 3, Part 3 ‑ 6 to Chapter 3, Part 3 ‑ 10 sections 200 ‑ 1 to 253 ‑ 15 Volume 6: Chapter 3, Part 3 ‑ 25 to Chapter 3, Part 3 ‑ 30 sections 275 ‑ 1 to 313 ‑ 85 Volume 7: Chapter 3, Part 3 ‑ 32 to Chapter 3, Part 3 ‑ 50 sections 315 ‑ 1 to 421 ‑ 85 Volume 8: Chapter 3, Part 3 ‑ 80 to Chapter 3, Part 3 ‑ 90 sections 615 ‑ 1 to 721 ‑ 40 Volume 9: Chapter 3, Part 3 ‑ 95 to Chapter 4, Part 4 ‑ 5 sections 723 ‑ 1 to 880 ‑ 205 Volume 10: Chapter 5, Part 5 ‑ 30 to Chapter 6, Part 6 ‑ 5 sections 900 ‑ 1 to 995 ‑ 1 Volume 11: Endnotes 1 to 3 Volume 12: Endnote 4 Each volume has its own contents About this compilation This compilation This is a compilation of the Income Tax Assessment Act 1997 that shows the text of the law as amended and in force on 1 July 2026 (the compilation date ). The notes at the end of this compilation (the endnotes ) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au). Application, saving and transitional provisions If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Presentational changes The Legislation Act 2003 provides for First Parliamentary Counsel to make presentational changes to a compilation. Presentational changes are applied to give a more consistent look and feel to legislation published on the Register, and enable the user to more easily navigate those documents. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register. Self ‑ repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Contents

Amendment history: Inserted by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3)

s 200-1 — What this Division is about

This Division provides an overview of the imputation system. Table of sections 200 ‑ 5 The imputation system 200 ‑ 10 Franking a distribution 200 ‑ 15 The franking account 200 ‑ 20 How a distribution is franked 200 ‑ 25 A corporate tax entity must not give its members credit for more tax than the entity has paid 200 ‑ 30 Benchmark rule 200 ‑ 35 Effect of receiving a franked distribution 200 ‑ 40 An Australian corporate tax entity can pass the benefit of having received a franked distribution on to its members 200 ‑ 45 Special rules for franking by some entities

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-5 — The imputation system

The * imputation system partially integrates the income tax liabilities of an Australian corporate tax entity and its members by: (a) allowing the entity, when distributing profits to its members, to pass to those members credit for income tax paid by the entity on those profits; and (b) allowing the entity’s Australian members to claim a tax offset for that credit; and (c) allowing the entity’s Australian members to claim a refund if they are unable to fully utilise the tax offset in reducing their income tax.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-10 — Franking a distribution

When an Australian corporate tax entity distributes profits to its members, the entity has the option of passing to those members credit for income tax paid by the entity on the profits. This is done by franking the distribution.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-15 — The franking account

(1) A franking account is used to keep track of income tax paid by the entity, so that the entity can pass to its members the benefit of having paid that tax when a distribution is made. (2) Each corporate tax entity has a franking account. (3) Typically, a corporate tax entity receives a credit in the account if the entity pays income tax or receives a franked distribution. A credit in the franking account is called a franking credit. (4) Typically, a corporate tax entity receives a debit in the account if the entity receives a refund of tax or franks a distribution to its members. A debit in the franking account is called a franking debit.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-20 — How a distribution is franked

(1) A corporate tax entity franks a distribution by allocating a franking credit to it. (2) The amount of the franking credit on the distribution is the amount specified in a statement that accompanies the distribution. (3) Only some kinds of distribution can be franked. These are called frankable distributions.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-25 — A corporate tax entity must not give its members credit for more tax than the entity has paid

(1) A corporate tax entity must not frank a distribution from profits with a franking credit that exceeds the maximum amount of income tax that could have been paid, at the entity’s corporate tax rate for imputation purposes for the income year in which the distribution is made, on the profits distributed. (2) If a distribution is franked in excess of this limit, the entity will be taken to have franked the distribution with the maximum franking credit for the distribution.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19)

s 200-30 — Benchmark rule

(1) All frankable distributions made within a particular period must be franked to the same extent. This is the benchmark rule. (2) It is designed to ensure that one member of a corporate tax entity is not preferred over another by the manner in which distributions are franked.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-35 — Effect of receiving a franked distribution

(1) Under Division 207, if an Australian member of a corporate tax entity receives a franked distribution, the member can usually offset, against the member’s own income tax liability, income tax paid by the entity on the profits underlying the distribution. (2) The tax offset to which the member is entitled is equal to the franking credit on the distribution. Note 1: A member may be entitled to a refund under Division 67 if the sum of the tax offset and certain other tax offsets exceeds the amount of income tax that the member would have to pay if the member had not got those tax offsets. Note 2: If the member is not a resident, the tax effects of receiving a distribution will be dealt with under Division 11A of Part III of the Income Tax Assessment Act 1936 , and Subdivision 207 ‑ D of this Part.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-40 — An Australian corporate tax entity can pass the benefit of having received a franked distribution on to its members

If an Australian corporate tax entity receives a franked distribution, it can pass the benefit of having received a franking credit on the distribution to its own members by franking distributions to those members.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 200-45 — Special rules for franking by some entities

There are special rules to deal with: (a) venture capital franking by a pooled development fund; and (b) franking by life insurance companies; and (c) franking by exempting companies and former exempting companies; and (d) franking by co ‑ operative companies; and (e) franking by companies that are NZ residents or members of the same wholly ‑ owned group as one or more companies that are NZ residents.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 67 of 2003, effective Schedule 10 (items 13–16): 14 Oct 2003 ( see s. 2(1)) | Amended by No 67 of 2003, effective Schedule 10 (items 13–16): 14 Oct 2003 ( see s. 2(1)) | Amended by No 101 of 2003, effective s. 4, Schedule 1 (items 2–20, 22), Schedule 2 (items 1–12), Schedule 3 (items 2–6) and Schedule 6 (items 16, 22–25, 27, 28, 30): Royal Assent s. 5: 11 Oct 2002 Sch 6 (items 17–19): 1 July 1997 (s 2(1) items 17, 18) Sch 6 (items 20, 21): 21 Dec 2000 (s 2(1) items 19, 20) Sch 6 (item 26): 10 Dec 1999 (s 2(1) item 22) Sch 6 (item 29): 30 June 2000 (s 2(1) item 25)

s 201-1 — Objects

(1) The main object of this Part is to allow certain * corporate tax entities to pass to their * members the benefit of having paid income tax on the profits underlying certain * distributions. (2) The other objects of this Part are to ensure that: (a) the imputation system is not used to give the benefit of income tax paid by a * corporate tax entity to * members who do not have a sufficient economic interest in the entity; and (b) the imputation system is not used to prefer some members over others when passing on the benefits of having paid income tax; and (c) the * membership of a corporate tax entity is not manipulated to create either of the outcomes mentioned in paragraphs (a) and (b).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 201-5 — Application of this Part

Subject to the rules on the application of this Part set out in the Income Tax (Transitional Provisions) Act 1997 , this Part applies to events that occur on or after 1 July 2002.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-1 — What this Subdivision is about

An entity can only frank a distribution if certain conditions are met. These conditions are set out in this Subdivision. Table of sections Operative provisions 202 ‑ 5 Franking a distribution

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-5 — Franking a distribution

An entity franks a * distribution if: (a) the entity is a * franking entity that satisfies the * residency requirement when the distribution is made; and (b) the distribution is a * frankable distribution; and (c) the entity allocates a * franking credit to the distribution. Note 1: Division 205 deals with a corporate tax entity’s franking account and sets out when credits, known as franking credits, and debits, known as franking debits, arise in that account. Note 2: The mechanism by which an entity allocates a franking credit to a distribution (for example, whether it is done by resolution or some other means) is determined by the entity.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-10 — What this Subdivision is about

Generally, a corporate tax entity that is an Australian resident at the time a distribution is made, can frank the distribution. There are some exceptions. Table of sections Operative provisions 202 ‑ 15 Franking entities 202 ‑ 20 Residency requirement when making a distribution

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16)

s 202-15 — Franking entities

An entity is a franking entity at a particular time if: (a) it is a * corporate tax entity at that time; and (b) it is not a * life insurance company that is a * mutual insurance company at that time; and (c) in a case where the entity is a company that is a trustee of a trust—it is not acting in its capacity as trustee of the trust at that time.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16)

s 202-20 — Residency requirement when making a distribution

An entity satisfies the residency requirement when making a * distribution if: (a) in the case of a company—the company is an Australian resident at that time; and (b) in the case of a * corporate limited partnership—the corporate limited partnership is an Australian resident at that time; and (d) in the case of a * public trading trust—the public trading trust is a resident unit trust for the income year in which that time occurs.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4)

s 202-25 — What this Subdivision is about

Generally, distributions that are made out of realised profits can be franked. Those distributions that are not frankable are identified. Table of sections 202 ‑ 30 Frankable distributions Operative provisions 202 ‑ 35 Object 202 ‑ 40 Frankable distributions 202 ‑ 45 Unfrankable distributions 202 ‑ 47 Distributions of certain ADI profits following restructure

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-30 — Frankable distributions

Distributions and non ‑ share dividends are frankable unless it is specified that they are unfrankable.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-35 — Object

The object of this Subdivision is to ensure that only distributions equivalent to realised taxed profits can be franked.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-40 — Frankable distributions

(1) A * distribution is a frankable distribution , to the extent that it is not unfrankable under section 202 ‑ 45. (2) A * non ‑ share dividend is a frankable distribution , to the extent that it is not unfrankable under section 202 ‑ 45.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-45 — Unfrankable distributions

The following are unfrankable : (c) where the purchase price on the buy ‑ back of a * share by a * company from one of its * members is taken to be a dividend under section 159GZZZP of the Income Tax Assessment Act 1936 —so much of that purchase price as exceeds what would be the market value (as normally understood) of the share at the time of the buy ‑ back if the buy ‑ back did not take place and were never proposed to take place; (d) a * distribution in respect of a * non ‑ equity share; (e) a distribution that is sourced, directly or indirectly, from a company’s * share capital account; (ea) a distribution or a part of a distribution to which subsection 207 ‑ 159(1) of this Act applies (distributions funded by capital raising); (f) an amount that is taken to be an unfrankable distribution under section 215 ‑ 10 or 215 ‑ 15 of this Act; (g) an amount that is taken to be a dividend for any purpose under any of the following provisions: (i) unless subsection 109RB(6) or 109RC(2) of the Income Tax Assessment Act 1936 applies in relation to the amount—Division 7A of Part III of that Act (distributions to entities connected with a * private company); (iii) section 109 of that Act (excessive payments to shareholders, directors and associates); (iv) section 47A of that Act (distribution benefits—CFCs); (h) an amount that is taken to be an unfranked dividend for any purpose: (i) under section 45 of the Income Tax Assessment Act 1936 (streaming bonus shares and unfranked dividends); (ii) because of a determination of the Commissioner under section 45C of that Act (streaming dividends and capital benefits); (i) a * demerger dividend; (j) a distribution that section 152 ‑ 125 or 220 ‑ 105 of this Act says is unfrankable; (k) a distribution by a * listed public company that is consideration for the cancellation of a * membership interest in the company as part of a selective reduction of capital, including a selective reduction within the meaning of section 256B of the Corporations Act 2001 .

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 67 of 2003, effective Schedule 10 (items 13–16): 14 Oct 2003 ( see s. 2(1)) | Amended by No 101 of 2003, effective s. 4, Schedule 1 (items 2–20, 22), Schedule 2 (items 1–12), Schedule 3 (items 2–6) and Schedule 6 (items 16, 22–25, 27, 28, 30): Royal Assent s. 5: 11 Oct 2002 Sch 6 (items 17–19): 1 July 1997 (s 2(1) items 17, 18) Sch 6 (items 20, 21): 21 Dec 2000 (s 2(1) items 19, 20) Sch 6 (item 26): 10 Dec 1999 (s 2(1) item 22) Sch 6 (item 29): 30 June 2000 (s 2(1) item 25) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 55 of 2007, effective 12 Apr 2007 | Amended by No 79 of 2007, effective Schedule 1 (items 28, 29, 39–42, 43(1), (6)), Schedules 3, 4, Schedule 6 (items 3–8), Schedule 9 (items 14–26, 30, 34) and Schedule 10 (items 10–13, 32): Royal Assent Schedule 8 (items 2, 12–25, 26(1)–(3)): 1 July 2007 | Amended by No 53 of 2015, effective Sch 1 (items 9–17, 19): 1 July 2016 (s 2) | Amended by No 101 of 2023, effective sch 4 (items 6-9, 13-21): 1 Jan 2024 (s 2(1) item 6) sch 5: 28 Nov 2023 (s 2(1) item 7)

s 202-47 — Distributions of certain ADI profits following restructure

(1) This section applies to an amount paid by a body corporate if: (a) the body corporate is a non ‑ operating holding company within the meaning of the Financial Sector (Transfer and Restructure) Act 1999 ; and (b) a restructure instrument under Part 4A of that Act is in force in relation to the body; and (c) because of the restructure to which the instrument relates, an * ADI becomes a subsidiary (within the meaning of that Act) of the body; and (d) the amount is sourced, directly or indirectly, from the profits of the ADI before the restructure instrument came into force; and (e) the amount would have been a * frankable distribution if it had been distributed by the ADI before the restructure instrument came into force. (2) The amount: (a) is taken to be a dividend paid by the body, for the purposes of this Act (and so is a * distribution by the body); and (b) is not taken to be an * unfrankable distribution by the body just because of paragraph 202 ‑ 45(e) (which makes distributions from * share capital accounts unfrankable).

Amendment history: Inserted by No 117 of 2007, effective 28 June 2007 | Amended by No 10 of 2018, effective Sch 7 (items 4–11): 5 Mar 2018 (s 2(1) item 2)

s 202-50 — What this Subdivision is about

The amount of the franking credit on a distribution is that stated in the distribution statement, unless the amount stated exceeds the maximum franking credit for the distribution. In that case, the amount of the franking credit on the distribution is taken to be the maximum franking credit for the distribution, worked out under this Subdivision. Table of sections 202 ‑ 55 What is the maximum franking credit for a frankable distribution? Operative provisions 202 ‑ 60 Amount of the franking credit on a distribution 202 ‑ 65 Where the franking credit stated in the distribution statement exceeds the maximum franking credit for the distribution

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-55 — What is the maximum franking credit for a frankable distribution?

The maximum franking credit for a distribution is equivalent to the maximum amount of income tax that the entity making the distribution could have paid, at the entity’s corporate tax rate for imputation purposes for the income year in which the distribution is made, on the profits underlying the distribution.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19)

s 202-60 — Amount of the franking credit on a distribution

(1) The amount of the * franking credit on a * distribution is that stated in the * distribution statement for the distribution, unless that amount exceeds the * maximum franking credit for the distribution. (2) The maximum franking credit for a * distribution is worked out using the formula: where: applicable gross ‑ up rate means the * corporate tax gross ‑ up rate of the entity making the distribution for the income year in which the distribution is made.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19)

s 202-65 — Where the franking credit stated in the distribution statement exceeds the maximum franking credit for the distribution

If the amount of a * franking credit stated in a * distribution statement for a * distribution exceeds the * maximum franking credit for the distribution, the amount of the franking credit on the distribution is taken to be the amount of the maximum franking credit for the distribution, and not the amount stated in the distribution statement.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-70 — What this Subdivision is about

An entity that makes a frankable distribution must give the recipient a statement setting out details of the distribution. Table of sections Operative provisions 202 ‑ 75 Obligation to give a distribution statement 202 ‑ 80 Distribution statement 202 ‑ 85 Changing the franking credit on a distribution by amending the distribution statement

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-75 — Obligation to give a distribution statement

(1) An entity that makes a * frankable distribution must give the recipient a * distribution statement. (2) The statement must be given on or before the day on which the * distribution is made, unless the entity is allowed to give the statement at a later time under subsection (3). (3) If the entity is a * private company for the income year in which the * distribution is made, the statement must be given: (a) before the end of 4 months after the end of the income year in which the distribution is made; or (b) before the time determined by the Commissioner under subsection (5); whichever is later. (4) However, the entity is not allowed to give the statement at a later time under subsection (3) if the statement indicates that a * franking credit has been allocated to the * distribution and the franking credit would, either alone or when added to other franking credits allocated to other distributions made by the entity during the income year, result in the entity having a liability for * franking deficit tax, or an increased liability for franking deficit tax, at the end of the income year. Note: The combined effect of subsections (3) and (4) is that a private company can retrospectively frank a distribution, but not so as to create or increase a liability for franking deficit tax. (5) The Commissioner may determine in writing that a * private company may give the statement before a time specified in the determination.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23)

s 202-80 — Distribution statement

(1) A distribution statement is a statement made in accordance with this section. (2) The statement must be in the * approved form. (3) The statement must: (a) identify the entity making the distribution; and (b) state the date on which the distribution is made; and (c) state the amount of the distribution; and (d) state that there is a * franking credit of an amount specified on the distribution; and (e) state the * franking percentage for the distribution; and (f) state the amount of any * withholding tax that has been deducted from the distribution by the entity; and (g) include any other information required by the * approved form that is relevant to imputation generally or the distribution. Note: Under the Taxation Administration Act 1953 it is an offence to fail to give a statement required under this Subdivision, or make a misleading statement in connection with a distribution (whether franked or not).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 202-85 — Changing the franking credit on a distribution by amending the distribution statement

Changing the franking credit on a specified distribution (1) The Commissioner may, on application by an entity, determine in writing that the entity may change the * franking credit on a specified * distribution by amending the * distribution statement for the distribution. (2) In deciding whether to make a determination under subsection (1), the Commissioner must have regard to: (a) whether the date for lodgment of an * income tax return by the recipient of the specified * distribution for the income year in which the distribution was made has passed; and (b) whether, if the * franking credit on the specified distribution were changed in accordance with the entity’s application, there would be any difference in the * withholding tax liability of the recipient; and (c) whether amending the distribution statement as requested by the entity would lead to a breach of the * benchmark rule, or any of the rules in Division 204 (the anti ‑ streaming rules); and (d) whether amending the distribution statement as requested by the entity would lead to a new * benchmark franking percentage being set for the entity for the * franking period in which the distribution was made; and (e) any other matters that the Commissioner considers relevant. Changing the franking credits on a specified class of distributions (3) The Commissioner may, on application by an entity, determine in writing that the entity may change the * franking credits on * distributions of a specified class by amending the * distribution statements for the distributions. (4) In deciding whether to make a determination under subsection (3), the Commissioner must have regard to: (a) the number of recipients to whom an amended * distribution statement would be made; and (b) whether the date for lodgment of * income tax returns by recipients of * distributions of the specified class for the income year in which the distributions were made has passed; and (c) whether, if the * franking credit on the specified distributions were changed in accordance with the entity’s application, there would be any difference in the * withholding tax liability of the recipients; and (d) whether amending the distribution statements as requested by the entity would lead to a breach of the * benchmark rule, or any of the rules in Division 204 (the anti ‑ streaming rules); and (e) whether amending the distribution statements as requested by the entity would lead to a new * benchmark franking percentage being set for the entity for the * franking period in which the distributions were made; and (f) any other matters that the Commissioner considers relevant. Applying to the Commissioner (5) The entity must: (a) make its application under this section in writing; and (b) include in the application all information relevant to the matters to which the Commissioner must have regard under: (i) subsection (2), if the application relates to a * distribution; or (ii) subsection (4), if the application relates to a class of distributions. Review (6) If the entity or a * member of the entity is dissatisfied with a determination under subsection (3), the entity or member may object to it in the manner set out in Part IVC of the Taxation Administration Act 1953 .

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-1 — What this Division is about

Distributions within a particular period must all be franked to the same extent. Table of sections 203 ‑ 5 Benchmark rule 203 ‑ 10 Benchmark franking percentage Operative provisions 203 ‑ 15 Object 203 ‑ 20 Application of the benchmark rule 203 ‑ 25 Benchmark rule 203 ‑ 30 Setting a benchmark franking percentage 203 ‑ 35 Franking percentage 203 ‑ 40 Franking periods—where the entity is not a private company 203 ‑ 45 Franking period—private companies 203 ‑ 50 Consequences of breaching the benchmark rule 203 ‑ 55 Commissioner’s powers to permit a departure from the benchmark rule

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-5 — Benchmark rule

(1) A corporate tax entity must frank all frankable distributions made within a particular period at a franking percentage set as the benchmark for that period. This is the benchmark rule. (2) The benchmark rule does not apply to some corporate tax entities. Those entities are identified in section 203 ‑ 20.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-10 — Benchmark franking percentage

(1) The benchmark franking percentage for an entity is set by reference to the franking percentage for the first frankable distribution made by the entity during the relevant period. (2) An entity has a benchmark franking percentage, even if it is not subject to the benchmark rule.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-15 — Object

The object of this Subdivision is to ensure that one * member of a * corporate tax entity is not preferred over another when the entity * franks * distributions.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-20 — Application of the benchmark rule

(1) The * benchmark rule does not apply to a company in a * franking period if either: (a) the company satisfies each of the following criteria: (i) at all times during the franking period, the company is a * listed public company; (ii) the company cannot make a * distribution on one * membership interest during the franking period without making a distribution under the same resolution on all other membership interests; (iii) the company cannot * frank a distribution made on one membership interest during the franking period without franking distributions made on all other membership interests under the same resolution with a * franking credit worked out using the same * franking percentage; or (b) the entity is a * 100% subsidiary of a company that satisfies the criteria set out in paragraph (a). (2) The following are examples of cases in which a company satisfies the criteria set out in paragraph (1)(a): (a) the company is a * listed public company with a single * class of * membership interest at all times during the relevant * franking period; (b) the company is a listed public company that, under its constituent documents, must not: (i) make a * distribution on one membership interest during the relevant franking period without making a distribution under the same resolution on all other membership interests; or (ii) * frank a distribution made on one membership interest during the relevant franking period without franking distributions made on all other membership interests under the same resolution with a * franking credit worked out using the same * franking percentage; (c) the company is a listed public company with more than one class of membership interest, but the rights in relation to distributions and the franking of distributions are the same for each class of membership interest. This is not an exhaustive list. (3) For the purposes of subsection (1), ignore * membership interests that do not carry a right to receive * distributions (other than distributions on the winding up of the company).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11)

s 203-25 — Benchmark rule

An entity must not make a * frankable distribution whose * franking percentage differs from the entity’s * benchmark franking percentage for the * franking period in which the distribution is made. This is the benchmark rule . Note: If a corporate tax entity franks a distribution in breach of this rule, the distribution will still be a franked distribution, although consequences will flow under section 203 ‑ 50.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-30 — Setting a benchmark franking percentage

The benchmark franking percentage for an entity for a * franking period is the same as the * franking percentage for the first * frankable distribution made by the entity within the period. Note: If no frankable distribution is made during the period, there is no benchmark franking percentage for the period.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-35 — Franking percentage

(1) Subject to subsection (2), the franking percentage for a * frankable distribution is worked out using the formula: (2) If the * franking percentage for a * frankable distribution would exceed 100% if it were worked out under subsection (1), it is taken to be 100%.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-40 — Franking periods—where the entity is not a private company

(1) Use this section to work out the franking periods for an entity in an income year where the entity is not a * private company for the income year. (2) If the entity’s income year is a period of 12 months, each of the following is a franking period for the entity in that year: (a) the period of 6 months beginning at the start of the entity’s income year; (b) the remainder of the income year. (3) If the entity’s income year is a period of 6 months or less, the franking period for the entity in that year is the same as the income year. (4) If the entity’s income year is a period of more than 6 months and less than 12 months, each of the following is a franking period for the entity in that year: (a) the period of 6 months beginning at the start of the entity’s income year; (b) the remainder of the income year. (5) If the entity’s income year is a period of more than 12 months, each of the following is a franking period for the entity in that year: (a) the period of 6 months beginning at the start of the entity’s income year (the first franking period ); (b) the period of 6 months beginning immediately after the end of the first franking period; (c) the remainder of the income year.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-45 — Franking period—private companies

The franking period for an entity that is a * private company for an income year is the same as the income year.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 203-50 — Consequences of breaching the benchmark rule

(1) If an entity makes a * frankable distribution in breach of the * benchmark rule: (a) the entity is liable to pay over ‑ franking tax imposed by the New Business Tax System (Over ‑ franking Tax) Act 2002 if the * franking percentage for the * distribution exceeds the entity’s * benchmark franking percentage for the * franking period in which the distribution is made; and (b) a * franking debit arises in the entity’s * franking account if the franking percentage for the distribution is less than the entity’s benchmark franking percentage for the franking period in which the distribution is made. (2) Use the following formula to work out: (a) in a case dealt with under paragraph (1)(a)—the amount of the * over ‑ franking tax; and (b) in a case dealt with under paragraph (1)(b)—the amount of the * franking debit: where: applicable gross ‑ up rate means the * corporate tax gross ‑ up rate of the entity making the distribution for the income year in which the distribution is made. franking % differential is the difference between: (a) the * franking percentage for the * frankable distribution; and (b) either: (i) if subparagraph (ii) does not apply—the entity’s * benchmark franking percentage for the * franking period in which the * distribution is made; or (ii) if the Commissioner in the exercise of the Commissioner’s powers under subsection 203 ‑ 55(1), permits the entity to frank the distribution at a different franking percentage—that percentage. Example: An entity makes 3 successive frankable distributions in a franking period. Each of those distributions is represented in the following diagram. The franking percentage for the first distribution is 40%, and so the entity’s benchmark franking percentage for the period is 40%. Note: Distribution 2 is under ‑ franked to the extent of the franking % differential. This is used to work out the amount of the under ‑ franking debit under subsection (2). Distribution 3 is over ‑ franked to the extent of the franking % differential. This is used to work out the amount of over ‑ franking tax on the distribution under the New Business Tax System (Over ‑ franking Tax) Act 2002 . The amount of the tax is calculated using the same formula as that set out in subsection (2). (3) A * franking debit arising under paragraph (1)(b) is in addition to any franking debit that would otherwise arise for the entity because of the * distribution. (4) The * franking debit arises on the day on which the * frankable distribution is made.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19)

s 203-55 — Commissioner’s powers to permit a departure from the benchmark rule

Powers of the Commissioner (1) The Commissioner may, on application by an entity, make a determination in writing permitting the entity to * frank a * distribution at a * franking percentage that differs from the entity’s * benchmark franking percentage for the * franking period in which the distribution is made. (2) Because the * benchmark rule is an integral part of the imputation system, the Commissioner’s powers under this section may only be exercised in extraordinary circumstances. Matters to which the Commissioner must have regard in exercising the power (3) In deciding whether there are extraordinary circumstances justifying the exercise of the Commissioner’s power to make a determination under subsection (1), the Commissioner must have regard to: (a) the entity’s reasons for departing, or proposing to depart, from the * benchmark rule; and (b) the extent of the departure, or proposed departure, from the benchmark rule; and (c) if the circumstances that give rise to the entity’s application are within the entity’s control, the extent to which the entity has sought the exercise of the Commissioner’s powers under this section in the past; and (d) whether a * member of the entity has been or will be disadvantaged as a result of the departure, or proposed departure, from the benchmark rule; and (e) whether a * member of the entity will receive greater * imputation benefits than another member of the entity because a distribution * franked at a * franking percentage that differs from the * benchmark franking percentage for the * franking period is made to one of them; and (f) any other matters that the Commissioner considers relevant. When may the powers be exercised? (4) The Commissioner may make a determination under subsection (1) either before or after the * frankable distribution is made. Consequence of the Commissioner exercising the power under this section (5) An allocation of a * franking credit at a percentage specified by the Commissioner in a determination under subsection (1) is taken to comply with the * benchmark rule. Applying to the Commissioner (6) The entity must: (a) make its application under this section in writing; and (b) include in the application all information relevant to the matters to which the Commissioner must have regard under subsection (3). Review (7) If the entity or a * member of the entity is dissatisfied with the determination under subsection (1), the entity or member may object to it in the manner set out in Part IVC of the Taxation Administration Act 1953 .

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-1 — Objects

The objects of this Division are to ensure that: (a) an entity and its * members cannot avoid the effect of the * benchmark rule by exploiting the * benchmark franking percentage of another entity; and (b) an entity does not stream * franked distributions and * tax ‑ exempt bonus shares; and (c) an entity does not stream * distributions to members of the entity who * derive a * greater benefit from franking credits than other members.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20)

s 204-5 — Application

(1) The rules in this Division will apply to an entity even if it is not subject to the benchmark rule. (2) This Division applies to non ‑ share dividends in the same way as it applies to distributions.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-10 — What this Subdivision is about

This Subdivision prevents the exploitation of a corporate tax entity’s benchmark franking percentage by another corporate tax entity, or that other entity’s members, by imposing a franking debit where there is exploitation. Table of sections Operative provisions 204 ‑ 15 Linked distributions

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-15 — Linked distributions

Franking debit arises where a distribution by one entity is substituted for a distribution by another (1) This section gives rise to a * franking debit if: (a) the exercise of a choice or selection by a * member of an entity (the first entity ); or (b) the member’s failure to exercise a choice or selection; has the effect of determining (to any extent) that another entity makes to one of its members a * distribution (the linked distribution ) that is: (c) in substitution (in whole or in part) for a distribution by the first entity to that member or any other member of the first entity; and (d) unfranked, or * franked at a * franking percentage that differs from the first entity’s * benchmark franking percentage for the * franking period in which the linked distribution is made. Note: Division 205 deals with a corporate tax entity’s franking account and sets out when a debit, known as a franking debit, arises in that account. Franking account in which the debit arises (2) The debit arises in the * franking account of the entity with the higher * benchmark franking percentage for the * franking period in which the linked distribution is made. Amount of the debit (3) The debit is equal to the one that would arise in that * franking account if the entity had made a * franked distribution, equal to the linked distribution, with a * franking percentage equal to the * benchmark franking percentage for that entity. When does the debit arise (4) The debit arises on the day on which the linked distribution is made. Debit is in addition to any other franking debit arising because of the linked distribution (5) The debit is in addition to any other debit that arises in an entity’s * franking account because of the linked distribution. Where an entity has no benchmark franking percentage (6) If an entity has no * benchmark franking percentage for the * franking period in which the linked distribution is made, this section applies as if: (a) in a case where the linked distribution has a * franking percentage of less than 50%—the entity had a benchmark franking percentage of 100% for that period; and (b) in a case where the linked distribution has a franking percentage equal to or greater than 50%—the entity had a benchmark franking percentage of 0% for that period.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-20 — What this Subdivision is about

This Subdivision prevents the substitution of a tax ‑ exempt bonus share for a franked distribution by imposing a franking debit on the issue of the share as if it were a franked distribution. Table of sections Operative provisions 204 ‑ 25 Substituting tax ‑ exempt bonus shares for franked distributions

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-25 — Substituting tax ‑ exempt bonus shares for franked distributions

Franking debit arises if tax ‑ exempt bonus shares are issued in substitution for a franked distribution (1) This section gives rise to a * franking debit in an entity’s * franking account if: (a) the exercise of a choice or selection by a * member of the entity; or (b) the member’s failure to exercise a choice or selection; has the effect of determining (to any extent) that the entity issues one or more * tax ‑ exempt bonus shares, to that member or another member of the entity, in substitution (in whole or in part) for one or more * franked distributions by the entity to that member or another member. Amount of the debit (2) The debit is equal to the one that would arise in the entity’s * franking account if the entity made a * distribution, equal to the * franked distributions referred to in subsection (1), franked at the entity’s * benchmark franking percentage for the * franking period in which the shares are issued. When does the debit arise (3) The debit arises on the day when the shares are issued. Meaning of tax ‑ exempt bonus share (4) For a company whose * shares have no par value, tax ‑ exempt bonus share means a share issued by the company in the circumstances mentioned in subsection 6BA(6) of the Income Tax Assessment Act 1936 . (5) For any other company, tax ‑ exempt bonus share means a * share issued by the company to a * shareholder in the company where: (a) the amount or value of the share is debited against an amount standing to the credit of a share premium account of the company; and (b) no part of the paid ‑ up value of the share is a dividend; and (c) the share is issued: (i) as a bonus share; or (ii) in the circumstances mentioned in subsection 6BA(1) of the Income Tax Assessment Act 1936 , as in force immediately before 1 July 1998. Where a company has no benchmark franking percentage for the franking period (6) If a company has no * benchmark franking percentage for the * franking period in which the * tax ‑ exempt bonus share is issued, this section applies as if the entity had a benchmark franking percentage of 100% for that period.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16)

s 204-26 — What this Subdivision is about

This Subdivision prevents the streaming of imputation benefits to one member of a corporate tax entity in preference to another by either imposing a franking debit or denying an imputation benefit where there is streaming. Table of sections Operative provisions 204 ‑ 30 Streaming distributions 204 ‑ 35 When does a franking debit arise if the Commissioner makes a determination under paragraph 204 ‑ 30(3)(a) 204 ‑ 40 Amount of the franking debit 204 ‑ 41 Amount of the exempting debit 204 ‑ 45 Effect of a determination about distributions to favoured members 204 ‑ 50 Assessment and notice of determination 204 ‑ 55 Right to review where a determination made

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-30 — Streaming distributions

Commissioner’s power to make a determination when distributions or distributions and other benefits are streamed (1) This section empowers the Commissioner to make determinations if an entity streams one or more * distributions (or one or more distributions and the giving of other benefits), whether in a single * franking period or in a number of franking periods, in such a way that: (a) an * imputation benefit is, or apart from this section would be, received by a * member of the entity as a result of the distribution or distributions; and (b) the member would * derive a * greater benefit from franking credits than another member of the entity; and (c) the other member of the entity will receive lesser imputation benefits, or will not receive any imputation benefits, whether or not the other member receives other benefits. The member that derives the greater benefit from franking credits is the favoured member . The member that receives the lesser imputation benefits is the disadvantaged member . Examples of other benefits (2) These are examples of the giving of other benefits: (a) issuing bonus * shares; (b) returning * paid ‑ up share capital; (c) * forgiving a debt; (d) the entity or another entity making a payment of any kind, or giving any property, to a * member or to another person on a member’s behalf. Nature of the determination that the Commissioner may make (3) The Commissioner may make one or more of these determinations: (a) that a specified * franking debit arises in the * franking account of the entity, for a specified * distribution or other benefit to a disadvantaged member; (b) that a specified * exempting debit arises in the * exempting account of the entity, for a specified * distribution or other benefit to a disadvantaged member; (c) that no * imputation benefit is to arise in respect of a distribution that is made to a favoured member and specified in the determination. A determination must be in writing. (4) The Commissioner may: (a) specify the * franking debit under paragraph (3)(a) by specifying the * franking percentage to be used in working out the amount of the debit; and (b) specify the * exempting debit under paragraph (3)(b) by specifying the * exempting percentage to be used in working out the amount of the debit. (5) The Commissioner may specify the * distribution under paragraph (3)(a), (b) or (c) by specifying: (a) the date on which the distribution was made, or the period during which the distribution was made; and (b) the member, or class of members, to whom the distribution was made. What is an imputation benefit? (6) A * member of an entity receives an imputation benefit as a result of a distribution if: (a) the member is entitled to a * tax offset under Division 207 as a result of the distribution; or (b) an amount would be included in the member’s assessable income as a result of the distribution because of the operation of section 207 ‑ 35; or (c) a * franking credit would arise in the * franking account of the member as a result of the distribution; or (d) an * exempting credit would arise in the * exempting account of the member as a result of the distribution; or (e) the member would not be liable to pay * withholding tax on the distribution, because of the operation of paragraph 128B(3)(ga) of the Income Tax Assessment Act 1936 ; or (f) the member is entitled to a * tax offset under section 210 ‑ 170 as a result of the distribution. When does a favoured member derive greater benefit from franking credits? (7) The following subsection lists some of the cases in which a * member of an entity * derives a greater benefit from franking credits than another member of the entity. It is not an exhaustive list. (8) A * member of an entity * derives a greater benefit from franking credits than another member of the entity if any of the following circumstances exist in relation to the other member in the income year in which the distribution giving rise to the benefit is made, and not in relation to the first member: (a) the other member is a foreign resident; (b) the other member would not be entitled to any * tax offset under Division 207 because of the distribution; (c) the amount of income tax that, apart from this Division, would be payable by the other member because of the distribution is less than the tax offset to which the other member would be entitled; (d) the other member is a * corporate tax entity at the time the distribution is made, but no * franking credit arises for the entity as a result of the distribution; (e) the other member is a * corporate tax entity at the time the distribution is made, but cannot use * franking credits received on the distribution to * frank distributions to its own members because: (i) it is not a * franking entity; or (ii) it is unable to make * frankable distributions; (f) the other member is an * exempting entity. (9) A * member of an entity * derives a greater benefit from franking credits than another member of the entity if any of the following circumstances exist in relation to the first member in the income year in which the * distribution giving rise to the benefit is made, and not in relation to the other member: (a) a * franking credit arises for the first member under item 5, 6 or 7 of the table in section 208 ‑ 130 (distributions by * exempting entities to exempting entities); (b) a franking credit or * exempting credit arises for the first member because the distribution is * franked with an exempting credit; (c) the first member is entitled to a * tax offset because: (i) the distribution is a * franked distribution made by an exempting entity; or (ii) the distribution is * franked with an exempting credit. (10) A * member of an entity * derives a greater benefit from franking credits than another member if the first member is entitled to a * tax offset under section 210 ‑ 170 as a result of the * distribution, and the other member is not.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 4 of 2007, effective Schedule 1 and Schedule 2 (items 11–16, 26): Royal Assent | Amended by No 79 of 2010, effective Sch 1 (items 3–5, 27–32), Sch 2 (items 2–8, 17–45), Sch 3 (items 2–59), Sch 4 (items 2–6, 38–46, 51) and Sch 5 (items 2, 6–13): 1 July 2010 (s 2(1) items 2–4)

s 204-35 — When does a franking debit arise if the Commissioner makes a determination under paragraph 204 ‑ 30(3)(a)

(1) If the Commissioner makes a determination giving rise to a * franking debit in the * franking account of an entity under paragraph 204 ‑ 30(3)(a), the debit arises in the franking account of the entity on the day on which the notice of determination is given to the entity in accordance with section 204 ‑ 50. (2) If the Commissioner makes a determination giving rise to an * exempting debit in the * exempting account of an entity under paragraph 204 ‑ 30(3)(b), the debit arises in the exempting account of the entity on the day on which the notice of determination is given to the entity in accordance with section 204 ‑ 50.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3)

s 204-40 — Amount of the franking debit

(1) The amount of the * franking debit arising because of a determination by the Commissioner under paragraph 204 ‑ 30(3)(a) must not exceed: (a) if the specified * distribution has been * franked—the difference between the amount of the * franking credit on the distribution and an amount worked out by multiplying the amount of the distribution by the highest * franking percentage at which a distribution to a favoured member is franked; or (b) if the specified distribution, although * frankable, has not been franked—an amount worked out by multiplying the amount of the distribution by the highest franking percentage at which a distribution to a favoured member is franked; or (c) if the specified distribution is * unfrankable—an amount worked out by multiplying the amount of the distribution by the highest franking percentage at which a distribution to a favoured member is franked; or (d) if the specified benefit is the issue of bonus shares from a share premium account—an amount worked out by multiplying the amount debited to the share premium account in respect of the bonus shares by the highest franking percentage at which a distribution to a favoured member is franked; or (e) if some other benefit is specified—an amount worked out by multiplying the value of the benefit by the highest franking percentage at which a distribution to a favoured member is franked. (2) In specifying the * franking debit, the Commissioner must have regard to: (a) any * franking debit already arising in the * franking account of the entity under paragraph 203 ‑ 50(1)(b) because the entity franked the specified * distribution in breach of the * benchmark rule; and (b) any franking debit already arising in the franking account of the entity, because of the specified distribution or benefit, under section 204 ‑ 15 (about linked distributions) or section 204 ‑ 25 (about substituting * tax ‑ exempt bonus shares for * franked distributions).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-41 — Amount of the exempting debit

The amount of the * exempting debit arising because of a determination by the Commissioner under paragraph 204 ‑ 30(3)(b) must not exceed: (a) if the specified * distribution has been * franked with an exempting credit—the difference between the amount of the * exempting credit on the distribution and an amount worked out by multiplying the amount of the distribution by the highest * exempting percentage at which a distribution to a favoured member is franked; or (b) if the specified distribution, although * frankable, has not been franked with an exempting credit—an amount worked out by multiplying the amount of the distribution by the highest exempting percentage at which a distribution to a favoured member is franked; or (c) if the specified distribution is * unfrankable—an amount worked out by multiplying the amount of the distribution by the highest exempting percentage at which a distribution to a favoured member is franked; or (d) if the specified benefit is the issue of bonus shares from a share premium account—an amount worked out by multiplying the amount debited to the share premium account in respect of the bonus shares by the highest exempting percentage at which a distribution to a favoured member is franked; or (e) if some other benefit is specified—an amount worked out by multiplying the value of the benefit by the highest exempting percentage at which a distribution to a favoured member is franked.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3)

s 204-45 — Effect of a determination about distributions to favoured members

If the Commissioner makes a determination denying an * imputation benefit under paragraph 204 ‑ 30(3)(c) (about distributions to favoured members), the determination has effect according to its terms.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20)

s 204-50 — Assessment and notice of determination

(1) A determination under subsection 204 ‑ 30(3) does not form part of an assessment. (2) The Commissioner must give notice in writing of the determination: (a) in a case where the Commissioner determines that a * franking debit is to arise in the * franking account of an entity under paragraph 204 ‑ 30(3)(a)—to the entity; and (b) in a case where the Commissioner determines that an * exempting debit is to arise in the * exempting account of an entity under paragraph 204 ‑ 30(3)(b)—to the entity; and (c) in a case where a favoured member is denied an * imputation benefit under paragraph 204 ‑ 30(3)(c)—to the favoured member. (3) If the Commissioner makes a determination denying an * imputation benefit under paragraph 204 ‑ 30(3)(c) on a * distribution made by a * listed public company, the Commissioner is taken to have served notice in writing of the determination on the favoured member if the Commissioner causes a notice to be published in a manner that results in the notice being accessible to the public and reasonably prominent. The notice is taken to have been served on the day on which the publication takes place.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 81 of 2016, effective Sch 1 (items 2–6, 26–32, 36), Sch 2 (items 1–8, 13–18, 20), Sch 3 (items 1–5, 9), Sch 5–8, Sch 9 (items 1–3, 5), Sch 10 (items 72–80, 93) and Sch 11: 1 Jan 2017 (s 2(1) items 2, 4, 6, 9) Sch 10 (items 2–27, 49–54): 1 July 2018 (s 2(1) item 5) | Amended by No 69 of 2023, effective sch 1 (item 109): 1 Jan 2024 (s 2(1) item 3) sch 4 (items 74-76): 15 Sept 2023 (s 2(1) item 5)

s 204-55 — Right to review where a determination made

If a taxpayer to whom a determination relates is dissatisfied with the determination, the taxpayer may object to it in the manner set out in Part IVC of the Taxation Administration Act 1953 .

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-65 — What this Subdivision is about

This Subdivision requires an entity to notify the Commissioner where there is a significant difference in its benchmark franking percentage over time, so that the Commissioner can assess whether there is streaming. Table of sections Operative provisions 204 ‑ 70 Application of this Subdivision 204 ‑ 75 Notice to the Commissioner 204 ‑ 80 Commissioner may require information where the Commissioner suspects streaming

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 204-70 — Application of this Subdivision

(1) This Subdivision applies to an entity if the difference between: (a) the * benchmark franking percentage for the entity for a * franking period (the current franking period ); and (b) the benchmark franking percentage for the entity for the last franking period in which a * frankable distribution was made (the last relevant franking period ); is more than the amount worked out using the following formula (whether the percentage for the current franking period is more than or less than the percentage for the last relevant franking period): (2) However, this Subdivision does not apply to an entity to which the benchmark rule does not apply. Note: Section 203 ‑ 20 identifies the entities to which the benchmark rule does not apply.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 41 of 2011, effective Schedule 1 (items 1–3): 1 Jan 2011 Schedule 1 (items 4–6) and Schedule 5 (items 25–29, 33, 36–50, 74–78, 80–145, 148–167, 173–175, 383–396, 400, 414–418): Royal Assent Schedule 5 (items 9, 18–20): 28 June 2011 Schedule 5 (items 51–54): 1 July 2011

s 204-75 — Notice to the Commissioner

(1) The entity must notify the Commissioner in writing of the difference. (3) The notice must also state: (a) the * benchmark franking percentage for the current franking period; and (b) the benchmark franking percentage for the last relevant franking period. (4) The notice must be in the * approved form and must be given to the Commissioner: (a) if the entity is required to give the Commissioner a * franking return for the income year in which the current franking period occurs—with that return; or (b) otherwise—within one month after the end of the income year in which the current franking period occurs. Note: See Subdivision 214 ‑ A for requirements to give the Commissioner franking returns.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 41 of 2011, effective Schedule 1 (items 1–3): 1 Jan 2011 Schedule 1 (items 4–6) and Schedule 5 (items 25–29, 33, 36–50, 74–78, 80–145, 148–167, 173–175, 383–396, 400, 414–418): Royal Assent Schedule 5 (items 9, 18–20): 28 June 2011 Schedule 5 (items 51–54): 1 July 2011

s 204-80 — Commissioner may require information where the Commissioner suspects streaming

(1) The Commissioner may request the entity to give the Commissioner the following information: (a) the entity’s reasons for setting a benchmark franking percentage for the current franking period that differs significantly from the benchmark franking percentage for the last relevant franking period; and (b) the * franking percentages for all * frankable distributions made in the current franking period and the last relevant franking period; and (c) details of any other benefits given to the entity’s * members, either by the entity or an * associate of the entity, during the period beginning at the beginning of the last relevant franking period and ending at the end of the current franking period; and (d) whether any member of the entity has * derived, or will derive, a * greater benefit from franking credits than another member of the entity as a result of the variation in the benchmark franking percentage between the current franking period and the last relevant franking period; and (e) any other information required by the * approved form that is relevant in determining whether the entity is streaming * distributions. (2) The entity must comply with the Commissioner’s request.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 41 of 2011, effective Schedule 1 (items 1–3): 1 Jan 2011 Schedule 1 (items 4–6) and Schedule 5 (items 25–29, 33, 36–50, 74–78, 80–145, 148–167, 173–175, 383–396, 400, 414–418): Royal Assent Schedule 5 (items 9, 18–20): 28 June 2011 Schedule 5 (items 51–54): 1 July 2011

s 205-1 — What this Division is about

This Division: • creates a franking account for each entity that is, or has been, a corporate tax entity; and • identifies when franking credits and debits arise in those accounts and the amount of those credits and debits; and • identifies when there is a franking surplus or deficit in the account; and • creates a liability to pay franking deficit tax if the account is in deficit at certain times; and • creates a tax offset for that liability. Table of sections 205 ‑ 5 Franking accounts, franking deficit tax liabilities and the related tax offset Operative provisions 205 ‑ 10 Each entity that is or has been a corporate tax entity has a franking account 205 ‑ 15 Franking credits 205 ‑ 20 Paying a PAYG instalment, income tax, diverted profits tax or Australian DMT tax 205 ‑ 25 Residency requirement for an event giving rise to a franking credit or franking debit 205 ‑ 30 Franking debits 205 ‑ 35 Refund of income tax, diverted profits tax or Australian DMT tax 205 ‑ 40 Franking surplus and deficit 205 ‑ 45 Franking deficit tax 205 ‑ 50 Deferring franking deficit 205 ‑ 70 Tax offset arising from franking deficit tax liabilities

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 107 of 2003, effective Sch 6: 1 July 2003 (s 2(1) item 3) Sch 7 (items 6–8): 30 June 2003 (s 2(1) item 5) Sch 7 (item 15): 17 Dec 2003 (s 2(1) item 7) Remainder: 21 Oct 2003 (s 2(1) items 1, 2, 4, 6, 8)

s 205-5 — Franking accounts, franking deficit tax liabilities and the related tax offset

(1) Each entity that is, or has ever been, a corporate tax entity has a franking account. (2) The payment of a PAYG instalment or income tax will generate a franking credit in that account. The amount of the credit is equal to the amount of tax paid. The receipt of a franked distribution by an entity from another corporate tax entity will also generate a franking credit. There are other circumstances in which a franking credit arises. (3) The receipt of a refund of income tax or the payment of a franked distribution by a corporate tax entity will generate a franking debit. There are, however, other cases where a franking debit arises. For example, a franking debit might arise under a determination by the Commissioner because distributions have been streamed. (4) An entity must be a franking entity at certain times and satisfy certain residency requirements before a franking credit or debit arises in its account. (5) Franking deficit tax is payable if the franking account of an entity is in deficit at the end of the entity’s income year, or when the entity ceases to be a franking entity. (6) A tax offset is available to an entity that has incurred a liability to pay franking deficit tax.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 107 of 2003, effective Sch 6: 1 July 2003 (s 2(1) item 3) Sch 7 (items 6–8): 30 June 2003 (s 2(1) item 5) Sch 7 (item 15): 17 Dec 2003 (s 2(1) item 7) Remainder: 21 Oct 2003 (s 2(1) items 1, 2, 4, 6, 8)

s 205-10 — Each entity that is or has been a corporate tax entity has a franking account

There is a franking account for each entity that is, or has at any time been, a * corporate tax entity. Note: The balance in the franking account on 1 July 2002 will either be nil or, if the entity had a franking surplus or deficit immediately before 1 July 2002 under the imputation scheme existing at that time, an amount calculated under the Income Tax (Transitional Provisions) Act 1997 .

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 205-15 — Franking credits

(1) The following table sets out when a credit arises in the * franking account of an entity and the amount of the credit. The credit is called a franking credit . Credits in the franking account Item If: A credit of: Arises: 1 the entity * pays a PAYG instalment; and the entity satisfies the * residency requirement for the income year in relation to which the PAYG instalment is paid; and the entity is a * franking entity for the whole or part of the relevant * PAYG instalment period that part of the payment that is attributable to the period during which the entity was a franking entity, less any reduction under subsection (4) on the day on which the payment is made 2 the entity * pays income tax; and the entity satisfies the * residency requirement for the income year for which the tax is paid; and the entity is a * franking entity for the whole or part of that income year that part of the payment that is attributable to the period during which the entity was a franking entity, less any reduction under subsection (4) on the day on which the payment is made 3 a * franked distribution is made to the entity; and the entity satisfies the * residency requirement for the income year in which the distribution is made; and the entity is a * franking entity when it receives the distribution; and the entity is entitled to a * tax offset because of the distribution under Division 207 the * franking credit on the distribution on the day on which the distribution is made 4 a * franked distribution * flows indirectly to the entity through a partnership or the trustee of a trust; and the entity is a * franking entity when the franked distribution is made; and the entity is entitled to a * tax offset because of the distribution under Division 207 the entity’s share of the * franking credit on the distribution at the time specified in subsection (2) 4A a * franking debit arises under item 2 or 2A of the table in subsection 205 ‑ 30(1) because the entity receives a * tax offset refund; and the entity’s tax offset refund is subsequently reduced and the entity is liable to pay to the Commonwealth the amount of the excess mentioned in subsection 172A(2) of the Income Tax Assessment Act 1936 ; and the entity pays the amount of the excess the difference (if any) between: (a) the amount of the franking debit; and (b) the amount the franking debit would have been if the tax offset refund were reduced by the amount of the excess on the day on which the amount of the excess is paid 5 the entity incurs a liability to pay * franking deficit tax under section 205 ‑ 45 or 205 ‑ 50 the amount of the liability immediately after the liability is incurred 6 a * franking credit arises under section 316 ‑ 275 for the * friendly society or one of its * wholly ‑ owned subsidiaries because the society or subsidiary * receives a refund of income tax the amount of the debit specified in subsection 316 ‑ 275(3) at the time provided by subsection 316 ‑ 275(4) 6A a * franking credit arises under paragraph 417 ‑ 50(5)(b) in relation to a deduction transferred to a * corporate tax entity the amount of the * franking credit specified in subsection 417 ‑ 50(6) at the time provided by paragraph 417 ‑ 50(5)(b) 6B a * franking credit arises under paragraph 417 ‑ 100(1)(c) in relation to * tax loss transferred to a * corporate tax entity the amount of the * franking credit specified in subsection 417 ‑ 100(3) at the time provided by paragraph 417 ‑ 100(1)(c) 7 a * franking credit arises under subsection 418 ‑ 50(1) in relation to an * exploration credit the amount of the * franking credit specified in subsection 418 ‑ 50(2) at the time provided by subsection 418 ‑ 50(3) 8 the entity * pays diverted profits tax; and the entity satisfies the * residency requirement for the income year for which the tax is paid; and the entity is a * franking entity for the whole or part of that income year that part of the payment that is attributable to the period during which the entity was a franking entity, multiplied by the proportion worked out under subsection (5) on the day on which the payment is made 9 the entity * pays Australian DMT tax; and the entity satisfies the * residency requirement for the income year corresponding to the * Fiscal Year for which the tax is paid; and the entity is a * franking entity for the whole or part of that income year that part of the payment that is attributable to the period during which the entity was a franking entity on the day on which the payment is made (2) A * franking credit covered by item 4 of the table arises at the end of the income year: (a) that is an income year of the last partnership or trust interposed between: (i) the entity; and (ii) the * corporate tax entity that made the distribution; and (b) during which the * franked distribution * flows indirectly to the entity. (3) Despite item 1 or 2 of the table in subsection (1), no credit arises on that part of the payment that is attributable to a payment of income tax in relation to an * RSA component. (4) An entity’s * franking credit for a payment mentioned in item 1 or 2 of the table in subsection (1) is reduced by the amount (if any) worked out as follows, but not below zero. Method statement Step 1. Identify any income years ending before the payment was made for which the entity has * received a refund of income tax. Step 2. Add up the part (if any) of each of those refunds that is attributable to a * tax offset that is subject to the refundable tax offset rules because of section 67 ‑ 30 (about R&D). Step 3. Subtract any reduction under this subsection of a * franking credit for any earlier payment by the entity. (For this purpose, assume a credit reduced to zero is still a franking credit.) (5) The proportion is the standard corporate tax rate (within the meaning of Part IVA of the Income Tax Assessment Act 1936 ) divided by 40%.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 101 of 2004, effective s. 4, Schedule 1 (items 2–4), Schedule 9, Schedule 10 (items 7–37) and Schedule 11 (items 144–146): Royal Assent Sch 2 and Sch 7 (items 1–8): 30 June 2003 (s 2(1) items 3, 8) Sch 3: 1 July 2003 (s 2(1) item 4) Sch 11 (item 35): 30 June 2000 (s 2(1) item 13) Sch 11 (items 52–59, 88, 89): 1 July 2000 (s 2(1) item 14) Sch 11 (items 141–143): 1 July 2001 (s 2(1) item 16) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 92 of 2008, effective Schedule 1 (items 10–22, 26): 1 Oct 2008 | Amended by No 88 of 2009, effective s. 4, Schedule 3 (items 1, 5–23), Schedule 4 (items 2–5) and Schedule 5 (items 113–204, 237, 238, 258, 282, 319–341, 344): 18 Sept 2009 Schedule 2 (items 4–15, 25–27, 30, 31): 1 Oct 2009 Schedule 2 (item 23): 1 Jan 2010 | Amended by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 21 of 2015, effective s 4 and Sch 6 (items 1, 2, 16–25, 73): 19 Mar 2015 (s 2(1) items 1, 7–11, 13) Sch 1 (items 1–17, 49), Sch 3 and Sch 7 (items 13–21): 20 Mar 2015 (s 2(1) items 2, 4, 15) Sch 4 (items 1–5, 9–17): 1 July 2015 (s 2(1) item 5) Sch 6 (items 51–59, 74–79): never commences (s 2(1) items 12, 14) | Amended by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015 | Amended by No 27 of 2017, effective Sch 1 (items 14–43, 52) and Sch 3: 1 July 2017 (s 2(1) items 4, 5) | Amended by No 59 of 2019, effective Sch 1 and Sch 2 (items 9–20): 30 Aug 2019 (s 2(1) item 2) | Amended by No 127 of 2021, effective Sch 1 and Sch 3 (items 42, 49–63, 65–69, 71, 72): 1 Jan 2022 (s 2(1) items 2, 5) Sch 2 (item 56) and Sch 3 (items 3–5, 33–35): 8 Dec 2021 (s 2(1) items 3, 4) | Amended by No 134 of 2024, effective sch 1 (items 6 ‑ 29, 66): 11 Dec 2024 (s 2(1) item 1)

s 205-20 — Paying a PAYG instalment, income tax, diverted profits tax or Australian DMT tax

(1) An entity pays a PAYG instalment if and only if: (a) the entity has a liability to pay the instalment; and (b) either: (i) the entity makes a payment to satisfy the liability (in whole or in part); or (ii) a credit, or an * RBA surplus, is applied to discharge or reduce the liability. Note: The requirement in paragraph (a) means that the entity cannot generate franking credits by making a “voluntary” payment of income tax (that is, paying an amount on account of income tax for which the entity is not liable at the time when the payment is made). (2) If an entity: (a) is liable to pay a * PAYG instalment; and (b) has a * PAYG instalment variation credit; the PAYG instalment variation credit must be fully applied to reduce the liability for the PAYG instalment before any other credit or payment can be applied to reduce that liability. (3) An entity pays income tax if and only if: (a) the entity has a liability to pay the income tax; and (b) either: (i) the entity makes a payment to satisfy the liability (in whole or in part); or (ii) a credit, or an * RBA surplus, is applied to discharge or reduce the liability. Note: The requirement in paragraph (a) means that the entity cannot generate franking credits by making a “voluntary” payment of income tax (that is, paying an amount on account of income tax for which the entity is not liable at the time when the payment is made). (3A) An entity pays diverted profits tax if and only if: (a) the entity has a liability to pay the * diverted profits tax; and (b) either: (i) the entity makes a payment to satisfy the liability (in whole or in part); or (ii) a credit, or an * RBA surplus, is applied to discharge or reduce the liability. (3B) An entity pays Australian DMT tax if and only if: (a) the entity has a liability to pay the * Australian DMT tax; and (b) either: (i) the entity makes a payment to satisfy the liability (in whole or in part); or (ii) a credit, or an * RBA surplus, is applied to discharge or reduce the liability. (4) Subparagraphs (1)(b)(ii), (3)(b)(ii) and (3A)(b)(ii) do not apply to the application of a credit allowable under or by virtue of section 45 ‑ 30 or 45 ‑ 215 in Schedule 1 to the Taxation Administration Act 1953 (these sections deal with credits for * PAYG instalments payable and credit on using a varied rate in certain cases). (5) The amount of the * PAYG instalment or income tax paid is equal to: (a) the amount of the liability, if it is satisfied in full; or (b) the amount by which the liability is reduced, if it is not satisfied in full. (6) If: (a) a surplus in an * RBA of an entity is applied to satisfy a liability of the entity to * pay a PAYG instalment in respect of an income year; and (b) a credit allowable under section 45 ‑ 30 in Schedule 1 to the Taxation Administration Act 1953 in respect of that income year is included in the RBA; and (c) the RBA does not include the liability to pay the * PAYG instalment; and (d) the amount of the credit exceeds the income tax assessed to the entity in respect of that income year; the amount of the PAYG instalment paid by virtue of the application of the surplus is reduced by the amount of the excess mentioned in paragraph (d).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 143 of 2007, effective Schedule 1 (items 1, 4, 128–194, 222, 223, 225, 226), Schedule 2, Schedule 5 (items 1–16, 48(1)–(3)), Schedule 6 and Schedule 7 (items 18–68): Royal Assent Schedule 5 (items 31–46): 15 Mar 2007 (s 2(1) item 6) | Amended by No 27 of 2017, effective Sch 1 (items 14–43, 52) and Sch 3: 1 July 2017 (s 2(1) items 4, 5) | Amended by No 134 of 2024, effective sch 1 (items 6 ‑ 29, 66): 11 Dec 2024 (s 2(1) item 1)

s 205-25 — Residency requirement for an event giving rise to a franking credit or franking debit

(1) An entity satisfies the residency requirement for an income year in which, or in relation to which, an event specified in a relevant table occurs if: (a) the entity is a company, or a * corporate limited partnership, to which at least one of the following subparagraphs applies: (i) the entity is an Australian resident for more than one half of the 12 months immediately preceding the event if the event occurs before the end of the income year; (ii) the entity is an Australian resident at all times during the income year when the entity exists if the event occurs at or after the end of the income year; (iii) the entity is an Australian resident for more than one half of the income year (whether or not the event occurs before the end of the income year); or (c) the entity is a * public trading trust for the income year. (2) The tables in sections 205 ‑ 15 and 205 ‑ 30 are relevant for the purposes of subsection (1).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 101 of 2004, effective s. 4, Schedule 1 (items 2–4), Schedule 9, Schedule 10 (items 7–37) and Schedule 11 (items 144–146): Royal Assent Sch 2 and Sch 7 (items 1–8): 30 June 2003 (s 2(1) items 3, 8) Sch 3: 1 July 2003 (s 2(1) item 4) Sch 11 (item 35): 30 June 2000 (s 2(1) item 13) Sch 11 (items 52–59, 88, 89): 1 July 2000 (s 2(1) item 14) Sch 11 (items 141–143): 1 July 2001 (s 2(1) item 16) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4)

s 205-30 — Franking debits

(1) The following table sets out when a debit arises in the * franking account of an entity and the amount of the debit. The debit is called a franking debit . Debits in the franking account Item If: A debit of: Arises: 1 the entity * franks a * distribution the amount of the * franking credit on the distribution on the day on which the distribution is made 2 the entity * receives a refund of income tax; and the entity satisfies the * residency requirement for the income year to which the refund relates; and the entity was a * franking entity during the whole or part of the income year to which the refund relates that part of the refund that is attributable to the period during which the entity was a franking entity on the day on which the refund is received 2A the entity * receives a * tax offset refund; and the entity does not satisfy the * residency requirement for the income year to which the refund relates; and the entity was a * franking entity during the whole or part of the income year to which the refund relates; and the entity’s * franking account is in * surplus on the day on which the refund is received the lesser of: (a) that part of the refund that is attributable to the period during which the entity was a franking entity; and (b) the amount of the * franking surplus on the day on which the refund is received 3 a * franking debit arises for the entity under paragraph 203 ‑ 50(1)(b) (the entity * franks a * distribution in contravention of the * benchmark rule) the franking debit worked out under paragraph 203 ‑ 50(2)(b) on the day specified in subsection 203 ‑ 50(4) 4 the entity ceases to be a * franking entity; and the entity’s * franking account is in * surplus immediately before ceasing to be a franking entity the amount of the * franking surplus on the day on which the entity ceases to be a franking entity 5 a * franking debit arises for the entity under section 204 ‑ 15 (linked distributions) the franking debit specified in subsection 204 ‑ 15(3) on the day specified in subsection 204 ‑ 15(4) 6 a * franking debit arises under section 204 ‑ 25 (debit for substituting * tax ‑ exempt bonus shares for * franked distributions) the amount of the debit specified in subsection 204 ‑ 25(2) on the day specified in subsection 204 ‑ 25(3) 7 the Commissioner makes a determination under paragraph 204 ‑ 30(3)(a) giving rise to a * franking debit for the entity (streaming distributions) the amount of the debit specified in the determination on the day specified in section 204 ‑ 35 7A a * franking debit arises under subsection 197 ‑ 45(1) because an amount to which Division 197 applies is transferred to a company’s * share capital account the amount of the debit specified in subsection 197 ‑ 45(2) at the time provided by subsection 197 ‑ 45(1) 7B a * franking debit arises under subsection 197 ‑ 65(2) because a company chooses to untaint its * share capital account the amount of the debit specified in subsection 197 ‑ 65(3) at the time provided by subsection 197 ‑ 65(2) 9 (a) the entity purchases a * membership interest in itself; and (b) the purchase is an * on ‑ market buy ‑ back; and (c) the entity is a company an amount equal to the debit that would have arisen if: (a) the purchase of the interest were a * frankable distribution equal to the one that would have arisen if the entity: (i) purchased the interest * off ‑ market; and (ii) in the case of a * listed public company—were not a listed public company; and (b) the distribution were * franked at the entity’s * benchmark franking percentage for the * franking period in which the purchase was made or, if the entity does not have a benchmark franking percentage for the period, at a * franking percentage of 100% on the day on which the interest is purchased 9A (a) the entity purchases a * membership interest in itself; and (b) the purchase is an * off ‑ market buy ‑ back; and (c) the entity is a * listed public company an amount equal to the debit that would have arisen if: (a) the purchase of the interest were a * frankable distribution equal to the one that would have arisen if the entity were not a listed public company; and (b) the distribution were * franked at the entity’s * benchmark franking percentage for the * franking period in which the purchase was made or, if the entity does not have a benchmark franking percentage for the period, at a * franking percentage of 100% on the day on which the interest is purchased 9B the entity makes a * distribution to which paragraph 202 ‑ 45(k) applies (consideration for cancellation of membership interest as part of selective reduction of capital) an amount equal to the debit that would have arisen if: (a) the distribution were a * frankable distribution equal to the one that would have arisen if the entity were not a * listed public company; and (b) the distribution were * franked at the entity’s * benchmark franking percentage for the * franking period in which the distribution was made or, if the entity does not have a benchmark franking percentage for the period, at a * franking percentage of 100% on the day on which the distribution is made 10 a * franking debit arises under section 316 ‑ 260 for the * friendly society or one of its * wholly ‑ owned subsidiaries because the * franking account of the society or subsidiary is in * surplus the amount of the debit specified in subsection 316 ‑ 260(2) at the time provided by subsection 316 ‑ 260(3) 11 a * franking debit arises under section 316 ‑ 265 for the * friendly society or one of its * wholly ‑ owned subsidiaries because a * franking credit arises for the society or subsidiary the amount of the debit specified in subsection 316 ‑ 265(3) at the time provided by subsection 316 ‑ 265(4) 12 a * franking debit arises under section 316 ‑ 270 for the * friendly society or one of its * wholly ‑ owned subsidiaries because a * franking credit arises for the society or subsidiary the amount of the debit specified in subsection 316 ‑ 270(3) at the time provided by subsection 316 ‑ 270(4) 13 the entity * receives a refund of diverted profits tax; and the entity satisfies the * residency requirement for the income year to which the refund relates; and the entity was a * franking entity during the whole or part of the income year to which the refund relates that part of the refund that is attributable to the period during which the entity was a franking entity, multiplied by the proportion worked out under subsection (3) on the day on which the refund is received 14 the entity * receives a refund of Australian DMT tax; and the entity satisfies the * residency requirement for the income year corresponding to the * Fiscal Year to which the refund relates; and the entity was a * franking entity during the whole or part of the income year to which the refund relates that part of the refund that is attributable to the period during which the entity was a franking entity on the day on which the refund is received Note: For completeness, the table refers to some franking debits that arise under other sections of the Act. This does not mean that separate franking debits arise both under the relevant section and this table. (2) Despite item 2 of the table in subsection (1), no debit arises on that part of the refund that is attributable to any of the following: (a) a payment of income tax in relation to an * RSA component; (b) a * tax offset that is subject to the refundable tax offset rules because of section 67 ‑ 30 (about R&D). (3) The proportion is the standard corporate tax rate (within the meaning of Part IVA of the Income Tax Assessment Act 1936 ) divided by 40%.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 80 of 2006, effective Schedule 1 (items 2–4), Schedule 2, Schedule 4 (items 1, 5–9, 14, 20, 23–30), Schedule 5, Schedule 6 (items 3–7) and Schedule 11 (items 1, 2, 4–24): Royal Assent Schedule 3 (items 2–5): 30 June 2006 (s 2(1) item 3) | Amended by No 79 of 2007, effective Schedule 1 (items 28, 29, 39–42, 43(1), (6)), Schedules 3, 4, Schedule 6 (items 3–8), Schedule 9 (items 14–26, 30, 34) and Schedule 10 (items 10–13, 32): Royal Assent Schedule 8 (items 2, 12–25, 26(1)–(3)): 1 July 2007 | Amended by No 92 of 2008, effective Schedule 1 (items 10–22, 26): 1 Oct 2008 | Amended by No 88 of 2009, effective s. 4, Schedule 3 (items 1, 5–23), Schedule 4 (items 2–5) and Schedule 5 (items 113–204, 237, 238, 258, 282, 319–341, 344): 18 Sept 2009 Schedule 2 (items 4–15, 25–27, 30, 31): 1 Oct 2009 Schedule 2 (item 23): 1 Jan 2010 | Amended by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 88 of 2013, effective s 4, Sch 1 (items 1–18), Sch 3 and Sch 7 (items 200–210, 236–242): 28 June 2013 (s 2(1) items 1, 2, 5, 21, 26) Sch 1 (items 33, 34): 1 July 2013 (s 2(1) item 3) Sch 5 (items 1–5, 7–9) and Sch 6 (items 3–41, 50–65): 29 June 2013 (s 2(1) items 8, 9, 14) Sch 7 (items 1–4): 1 July 2012 (s 2(1) item 15) | Amended by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015 | Amended by No 27 of 2017, effective Sch 1 (items 14–43, 52) and Sch 3: 1 July 2017 (s 2(1) items 4, 5) | Amended by No 101 of 2023, effective sch 4 (items 6-9, 13-21): 1 Jan 2024 (s 2(1) item 6) sch 5: 28 Nov 2023 (s 2(1) item 7) | Amended by No 134 of 2024, effective sch 1 (items 6 ‑ 29, 66): 11 Dec 2024 (s 2(1) item 1)

s 205-35 — Refund of income tax, diverted profits tax or Australian DMT tax

(1) An entity receives a refund of income tax if and only if: (a) either: (i) the entity receives an amount as a refund; or (ii) the Commissioner applies a credit, or an * RBA surplus, against a liability or liabilities of the entity; and (b) the refund of the amount, or the application of the credit, represents in whole or in part: (i) a return to the entity of an amount paid or applied to satisfy the entity’s liability to pay income tax; or (ii) the amount remaining after applying a * loss carry back tax offset, or a * tax offset that is subject to the refundable tax offset rules because of section 67 ‑ 30 (about R&D), against the entity’s basic income tax liability. (1A) An entity receives a refund of diverted profits tax if and only if: (a) either: (i) the entity receives an amount as a refund; or (ii) the Commissioner applies a credit, or an * RBA surplus, against a liability or liabilities of the entity; and (b) the refund of the amount, or the application of the credit, represents in whole or in part a return to the entity of an amount paid or applied to satisfy the entity’s liability to pay * diverted profits tax. (1B) An entity receives a refund of Australian DMT tax if and only if: (a) either: (i) the entity receives an amount as a refund; or (ii) the Commissioner applies a credit, or an * RBA surplus, against a liability or liabilities of the entity; and (b) the refund of the amount, or the application of the credit, represents in whole or in part a return to the entity of an amount paid or applied to satisfy the entity’s liability to pay * Australian DMT tax. (2) The amount of the refund is so much of the amount refunded or applied as represents the return, or amount remaining, referred to in paragraph (1)(b), (1A)(b) or (1B)(b).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 93 of 2011, effective Schedule 1, Schedule 3 (items 1–4, 15–42, 54–107) and Schedule 4 (items 1–9): Royal Assent | Amended by No 88 of 2013, effective s 4, Sch 1 (items 1–18), Sch 3 and Sch 7 (items 200–210, 236–242): 28 June 2013 (s 2(1) items 1, 2, 5, 21, 26) Sch 1 (items 33, 34): 1 July 2013 (s 2(1) item 3) Sch 5 (items 1–5, 7–9) and Sch 6 (items 3–41, 50–65): 29 June 2013 (s 2(1) items 8, 9, 14) Sch 7 (items 1–4): 1 July 2012 (s 2(1) item 15) | Amended by No 96 of 2014, effective Sch 1 (items 14–45, 122–124), Sch 2 (items 1, 14–40, 42, 43) and Sch 3–5: 30 Sept 2014 (s 2(1) item 2) Sch 8 (items 15–22, 26) and Sch 9 (items 21, 22, 24): 31 Dec 2016 (s 2(1) items 7, 9) | Amended by No 27 of 2017, effective Sch 1 (items 14–43, 52) and Sch 3: 1 July 2017 (s 2(1) items 4, 5) | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7) | Amended by No 134 of 2024, effective sch 1 (items 6 ‑ 29, 66): 11 Dec 2024 (s 2(1) item 1)

s 205-40 — Franking surplus and deficit

(1) An entity’s * franking account is in surplus at a particular time if, at that time, the sum of the * franking credits in the account exceeds the sum of the * franking debits in the account. The amount of the franking surplus is the amount of the excess. (2) An entity’s * franking account is in deficit at a particular time if, at that time, the sum of the * franking debits in the account exceeds the sum of the * franking credits in the account. The amount of the franking deficit is the amount of the excess.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 205-45 — Franking deficit tax

Object (1) While recognising that an entity may anticipate * franking credits when * franking * distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its * franking account at certain times and levying tax if the account is in * deficit. Franking deficit at end of income year (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its * franking account is in * deficit at the end of an income year. Corporate tax entity ceases to be a franking entity (3) An entity is liable to pay * franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: (a) it ceases to be a * franking entity; and (b) immediately before it ceases to be a franking entity, its * franking account is in * deficit. Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 205-50 — Deferring franking deficit

Object (1) The object of this section is to ensure that an entity does not avoid * franking deficit tax by deferring the time at which a * franking debit occurs in its * franking account. End of year deficit deferred (2) An entity is taken to have * received a refund of income tax for an income year immediately before the end of that year for the purposes of subsection 205 ‑ 45(2) if: (a) the refund is paid within 3 months after the end of that year; and (b) the * franking account of the entity would have been in * deficit, or in deficit to a greater extent, at the end of that year if the refund had been received in that year. Deficit on ceasing to be a franking entity deferred (3) If an entity ceases to be a * franking entity during an income year, the entity is taken to have * received a refund of income tax immediately before it ceased to be a franking entity for the purposes of subsection 205 ‑ 45(3) if: (a) the refund is attributable to a period in the year during which the entity was a franking entity; and (b) the refund is paid within 3 months after the entity ceases to be a franking entity; and (c) the * franking account of the entity would have been in * deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity if the refund had been received before it ceased to be a franking entity.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16)

s 205-70 — Tax offset arising from franking deficit tax liabilities

When does the tax offset arise? (1) A * corporate tax entity is entitled to a * tax offset for an income year for which it satisfies the * residency requirement (the relevant year ) if at least one of the following applies: (a) the entity has incurred a liability to pay * franking deficit tax in the relevant year; (b) the entity incurred such a liability in a previous income year for which it did not satisfy the residency requirement, and that liability has not been taken into account in working out a tax offset under this section; (c) when the entity was last entitled to a tax offset under this section for a previous income year, some of the offset remained after applying section 63 ‑ 10 (tax offset priority rules). The amount of the tax offset (2) Work out the amount of the * tax offset for the relevant year as follows: Method statement Step 1. Work out the total amount of * franking deficit tax that is covered by paragraph (1)(a). Then, subject to subsections (5) and (6), reduce so much of it as is attributable to * franking debits to which subsection (8) applies by 30% if that part exceeds 10% of the total amount of * franking credits that arose in the entity’s * franking account for the relevant year. Step 2. Work out the total amount of * franking deficit tax that is covered by paragraph (1)(b) for a previous income year. Then, subject to subsections (5) and (6), reduce so much of it as is attributable to * franking debits to which subsection (8) applies by 30% if that part exceeds 10% of the total amount of * franking credits that arose in the entity’s * franking account for that previous income year. Step 3. Add up the results of step 2 for all the previous income years covered by paragraph (1)(b). Step 4. Work out the remaining amount of a * tax offset covered by paragraph (1)(c). Step 5. Add up the results of steps 1, 3 and 4. The result is the * tax offset to which the entity is entitled under this section for the relevant year. Note: This method statement is modified for certain late balancing entities: see section 205 ‑ 70 of the Income Tax (Transitional Provisions) Act 1997 . Example: The following apply to a corporate tax entity that satisfies the residency requirement for an income year: • the entity’s income tax liability for that year would be $100,000 if its tax offsets were disregarded; • for that year, the entity has a tax offset of $60,000 under this section (the franking deficit offset ) and a tax offset of $80,000 in respect of foreign income tax paid by the entity (the foreign income tax offset ). Under section 63 ‑ 10 (about tax offset priority rules), the foreign income tax offset must be applied before the franking deficit offset is applied. As a result, that offset and $20,000 of the franking deficit offset combine to reduce the entity’s income tax liability to nil. The remaining $40,000 of the franking deficit offset will be included in a franking deficit offset for the next income year for which the entity satisfies the residency requirement. Residency requirement (4) To determine whether the entity satisfies the * residency requirement for the relevant year, section 205 ‑ 25 has effect as if each of the following were an event specified in a relevant table for the purposes of that section: (a) the entity incurring a liability to pay * franking deficit tax in the relevant year; (b) the assessment of the entity’s * income tax liability for the relevant year that is made on the * assessment day for that year. 30% reduction will generally not apply to private company’s first year of tax liability (5) The 30% reductions in steps 1 and 2 of the method statement in subsection (2) do not apply in working out the amount of the * tax offset to which the entity is entitled for the relevant year if: (a) the entity is a * private company for the relevant year; and (b) if the company did not have the tax offset (but had all its other tax offsets) it would have had an * income tax liability for the relevant year; and (c) the company has not had an income tax liability for any income year before the relevant year; and (d) the amount of the liability referred to in paragraph (b) is at least 90% of the amount of the * deficit in the company’s * franking account at the end of the relevant year. Commissioner’s discretion (6) The 30% reductions in steps 1 and 2 of the method statement in subsection (2) do not apply in working out the amount of the * tax offset to which the entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the * approved form, that the excess referred to in those steps was due to events outside the control of the entity. (7) A determination under subsection (6) is not a legislative instrument. Applicable franking debits (8) This subsection applies to * franking debits in the * franking account of an entity: (a) that arise under table item 1, 3, 5 or 6 in section 205 ‑ 30 for an income year; and (b) if the entity has franking debits covered by paragraph (a) for that income year—that arise under table item 2 in that section for that income year.

Amendment history: Inserted by No 107 of 2003, effective Sch 6: 1 July 2003 (s 2(1) item 3) Sch 7 (items 6–8): 30 June 2003 (s 2(1) item 5) Sch 7 (item 15): 17 Dec 2003 (s 2(1) item 7) Remainder: 21 Oct 2003 (s 2(1) items 1, 2, 4, 6, 8) | Amended by No 78 of 2005, effective 29 June 2005 | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 143 of 2007, effective Schedule 1 (items 1, 4, 128–194, 222, 223, 225, 226), Schedule 2, Schedule 5 (items 1–16, 48(1)–(3)), Schedule 6 and Schedule 7 (items 18–68): Royal Assent Schedule 5 (items 31–46): 15 Mar 2007 (s 2(1) item 6) | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 207-5 — Overview

(1) If a corporate tax entity makes a franked distribution to one of its members, then, as a general rule: (a) an amount equal to the franking credit on the distribution is included in the member’s assessable income; and (b) the member is entitled to a tax offset equal to the same amount. (2) In some cases a residency requirement must be satisfied for the general rule to apply. (3) If a franked distribution is made to a member that is a partnership or the trustee of a trust, an amount equal to the franking credit on the distribution is also included in the member’s assessable income as mentioned in paragraph (1)(a). (4) However, a tax offset in relation to that distribution is only available to an entity (who may be a partner, beneficiary or a trustee) if the distribution flows indirectly to it and does not flow indirectly through it to another entity. The tax offset is equal to its share of the franking credit on the distribution. Note: That share is a notional amount and the entity can have that share without actually receiving any of that franking credit or distribution. (5) There are exceptions to both the general rule mentioned in subsection (1) and the special rule mentioned in subsection (4). Basically, these exceptions are created: (a) where the relevant entity would not have paid tax on the distribution or a share of the distribution (see Subdivisions 207 ‑ D and 207 ‑ E); and (b) where there is a manipulation of the imputation system in a manner that is not permitted under the income tax law (see Subdivision 207 ‑ F).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23)

s 207-10 — What this Subdivision is about

As a general rule, if a member of an entity receives a franked distribution: • an amount equal to the franking credit on the distribution is included in the member’s assessable income; and • the member is entitled to a tax offset equal to the franking credit on the distribution. Table of sections Operative provisions 207 ‑ 15 Applying the general rule 207 ‑ 20 General rule—gross ‑ up and tax offset

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 207-15 — Applying the general rule

(1) This Subdivision sets out, as a general rule, the tax effect of receiving a * franked distribution. (2) This Subdivision does not apply to: (a) a partnership or trustee to whom a * franked distribution is made (except a partnership or trustee that is a * corporate tax entity, or a trustee of a trust that is a * complying superannuation entity, when the distribution is made); or (b) an entity to whom a franked distribution * flows indirectly. Note: Subject to the other provisions in this Division, Subdivision 207 ‑ B applies to an entity excluded from the application of this Subdivision because of this subsection. (3) This Subdivision applies subject to Subdivisions 207 ‑ C, 207 ‑ D, 207 ‑ E and 207 ‑ F. Note 1: Subdivision 207 ‑ C sets out the residency requirements that must be satisfied by an individual or a corporate tax entity that receives a franked distribution. Note 2: Subdivision 207 ‑ D sets out the cases in which the gross ‑ up and tax offset rules in this Subdivision and Subdivision 207 ‑ B will not apply because the franked distribution (or a share of it) would not have been taxed in any case. Note 3: Subdivision 207 ‑ E sets out the exceptions to the rules in Subdivision 207 ‑ D. Note 4: Subdivision 207 ‑ F sets out the cases in which the gross ‑ up and tax offset rules in this Subdivision and Subdivision 207 ‑ B will not apply because the imputation system has been manipulated in a way that is not permitted under the income tax law.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 66 of 2003, effective s 4, Sch 2 (items 1–5, 17), Sch 3 (items 49–70, 71–128, 129–131, 140, 141), Sch 4, Sch 6 (items 1, 3) and Sch 7 (items 6–9): 30 June 2003 (s 2(1) items 1, 3, 6–8, 8B–12, 12B, 14, 15, 17, 18) Sch 3 (items 70A, 128A): 2 Apr 2003 (s 2(1) items 8A, 12A) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 45 of 2008, effective 26 June 2008 | Amended by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 207-20 — General rule—gross ‑ up and tax offset

(1) If an entity makes a * franked distribution to another entity, the assessable income of the receiving entity, for the income year in which the distribution is made, includes the amount of the * franking credit on the distribution. This is in addition to any other amount included in the receiving entity’s assessable income in relation to the distribution under any other provision of this Act. (2) The receiving entity is entitled to a * tax offset for the income year in which the distribution is made. The tax offset is equal to the * franking credit on the distribution.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 207-25 — What this Subdivision is about

This Subdivision deals with an entity that receives a benefit of a franked distribution where: (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. The distribution is regarded as flowing indirectly to the entity under this Subdivision. On the basis of a notional amount of the entity’s share of the distribution, the entity may be entitled to have an amount included in its assessable income and/or a tax offset under this Subdivision. Table of sections Gross ‑ up and tax offset 207 ‑ 30 Applying this Subdivision 207 ‑ 35 Gross ‑ up—distribution made to, or flows indirectly through, a partnership or trustee 207 ‑ 37 Attributable franked distribution—trusts 207 ‑ 45 Tax offset—distribution flows indirectly to an entity Key concepts 207 ‑ 50 When a franked distribution flows indirectly to or through an entity 207 ‑ 55 Share of a franked distribution 207 ‑ 57 Share of the franking credit on a franked distribution 207 ‑ 58 Specifically entitled to an amount of a franked distribution 207 ‑ 59 Franked distributions within class treated as single franked distribution

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23)

s 207-30 — Applying this Subdivision

This Subdivision applies subject to Subdivisions 207 ‑ D, 207 ‑ E and 207 ‑ F. Note 1: Subdivision 207 ‑ D sets out the cases in which the gross ‑ up and tax offset rules in this Subdivision and Subdivision 207 ‑ A will not apply because the franked distribution (or a share of it) would not have been taxed in any case. Note 2: Subdivision 207 ‑ E sets out the exceptions to the rules in Subdivision 207 ‑ D. Note 3: Subdivision 207 ‑ F sets out the cases in which the gross ‑ up and tax offset rules in this Subdivision and Subdivision 207 ‑ A will not apply because the imputation system has been manipulated in a way that is not permitted under the income tax law.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 66 of 2003, effective s 4, Sch 2 (items 1–5, 17), Sch 3 (items 49–70, 71–128, 129–131, 140, 141), Sch 4, Sch 6 (items 1, 3) and Sch 7 (items 6–9): 30 June 2003 (s 2(1) items 1, 3, 6–8, 8B–12, 12B, 14, 15, 17, 18) Sch 3 (items 70A, 128A): 2 Apr 2003 (s 2(1) items 8A, 12A) | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23)

s 207-35 — Gross ‑ up—distribution made to, or flows indirectly through, a partnership or trustee

Additional amount of assessable income (1) If: (a) a * franked distribution is made in an income year to an entity that is a partnership or the trustee of a trust; and (b) the entity is not a * corporate tax entity when the distribution is made; and (c) if the entity is the trustee of a trust—the trust is not a * complying superannuation entity when the distribution is made; the assessable income of the partnership or trust for that income year includes the amount of the * franking credit on the distribution. (2) The amount is in addition to any other amount included in that assessable income in relation to the distribution under any other provision of this Act. Note: The amount will affect the income tax liability of a partner in the partnership, or a beneficiary or the trustee of the trust: see Divisions 5 and 6 of Part III of the Income Tax Assessment Act 1936 . (3) Subsection (4) applies if: (a) a * franked distribution is made, or * flows indirectly, to a partnership or the trustee of a trust in an income year; and (b) the assessable income of the partnership or trust for that year includes an amount (the franking credit amount ) that is all or a part of the additional amount of assessable income included under subsection (1) in relation to the distribution; and (c) the distribution flows indirectly to an entity that is a partner in the partnership, or a beneficiary or the trustee of the trust; and (d) disregarding Division 6E of Part III of the Income Tax Assessment Act 1936 , the entity has an amount of assessable income for that year that is attributable to all or a part of the distribution. (4) Despite any provisions in Divisions 5 and 6 of Part III of the Income Tax Assessment Act 1936 , the entity’s assessable income for that year also includes: (a) in the case of an entity that is a partner in a partnership—so much of the franking credit amount as is equal to the entity’s * share of the * franking credit on the distribution; and (b) in the case of an entity that is a beneficiary of a trust: (i) so much of the franking credit amount as is equal to the entity’s share of the franking credit on the distribution; and (ii) the amount mentioned in section 207 ‑ 37. Example: A franked distribution of $70 is made to the trustee of a trust in an income year. The trust also has $100 of assessable income from other sources. Under subsection (1), the trust’s assessable income includes an additional amount of $30 (which is the franking credit on the distribution). The trust has a net income of $200 for that income year. There are 2 beneficiaries of the trust, P and Q, who are presently entitled to the trust’s income. Under the trust deed, P is entitled to all of the franked distribution and Q is entitled to all other income. The distribution flows indirectly to P (as P has a share of the trust’s net income that is covered by paragraph 97(1)(a) and has a share of the distribution under section 207 ‑ 55 equal to 100% of the distribution). Under this subsection, P’s assessable income includes $70 (the amount mentioned in section 207 ‑ 37 (attributable franked distribution)) and also includes the full amount of the franking credit (as P’s share of the franking credit on the distribution is $30 under section 207 ‑ 57). Q’s assessable income does not include any of the amount of the franked distribution or the franking credit. (5) Subsection (6) applies if: (a) a * franked distribution is made, or * flows indirectly, to the trustee of a trust in an income year; and (b) the assessable income of the trust for that year includes an amount (the franking credit amount ) that is all or a part of the additional amount of assessable income included under subsection (1) in relation to the distribution; and (c) disregarding Division 6E of Part III of the Income Tax Assessment Act 1936 , the trustee of the trust is liable to be assessed (and pay tax) in respect of an amount (the assessable amount ) under section 98, 99 or 99A of that Act in relation to the trust. (6) Despite any provisions in Division 6 of Part III of the Income Tax Assessment Act 1936 , for the purposes of that Division, increase the assessable amount by so much of the franking credit amount as is equal to: (a) if the trustee of the trust is liable to be assessed (and pay tax) under section 98 of that Act—the sum of: (i) the trustee’s * share of the * franking credit on the distribution in respect of the beneficiary; and (ii) the amount mentioned in section 207 ‑ 37; or (b) if the trustee of the trust is liable to be assessed (and pay tax) under section 99 or 99A of that Act—the sum of: (i) the trustee’s share of the franking credit on the distribution; and (ii) the amount mentioned in section 207 ‑ 37.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 45 of 2008, effective 26 June 2008 | Amended by No 62 of 2011, effective Sch 1 (items 1–3, 6–12, 14), Sch 2 (items 8–27, 45–51), Sch 3 (items 1–3, 9–19) and Sch 4 (items 33, 34): 29 June 2011 (s 2(1) items 2, 3, 5, 6) Sch 3 (items 4–8): 30 June 2011 (s 2(1) item 4) | Amended by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015

s 207-37 — Attributable franked distribution—trusts

(1) The amount is the product of: (a) the amount of the * franked distribution (to the extent that an amount of the franked distribution remained after reducing it by deductions that were directly relevant to it); and (b) the beneficiary’s or the trustee’s (as the case requires) * share of the franked distribution (see section 207 ‑ 55), divided by the amount of the franked distribution. (2) Subsection (3) applies if the net income of the trust estate (disregarding the amount of any * franking credits) for the relevant income year falls short of the sum of: (a) the * net capital gain (if any) of the trust estate for the income year; and (b) the total of all * franked distributions (if any) included in the assessable income of the trust estate for the income year (to the extent that an amount of the franked distributions remained after reducing them by deductions that were directly relevant to them). (3) For the purposes of subsection (1), replace paragraph (a) of that subsection with the following paragraph: (a) the product of: (i) the amount of the * franked distribution (to the extent that an amount of the franked distribution remained after reducing it by deductions that were directly relevant to it); and (ii) the * net income of the trust estate for that income year (disregarding the amount of any * franking credits), divided by the sum mentioned in subsection (2); and

Amendment history: Inserted by No 62 of 2011, effective Sch 1 (items 1–3, 6–12, 14), Sch 2 (items 8–27, 45–51), Sch 3 (items 1–3, 9–19) and Sch 4 (items 33, 34): 29 June 2011 (s 2(1) items 2, 3, 5, 6) Sch 3 (items 4–8): 30 June 2011 (s 2(1) item 4)

s 207-45 — Tax offset—distribution flows indirectly to an entity

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 entity, a * non ‑ complying superannuation fund or a * non ‑ complying approved deposit fund in relation to that income year. Note: The entities covered by this section are the ultimate recipients of the distribution because the distribution does not flow indirectly through them to other entities. As a result they are also the ultimate taxpayers in respect of the distribution and are given the tax offset to acknowledge the income tax that has already been paid on the profits underlying the distribution.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 15 of 2007, effective s 4, Sch 1 (items 150–236, 240, 242–260, 406(1)–(3)), Sch 3 (items 8–44, 66) and Sch 4 (items 1–8): 15 Mar 2007 (s 2(1) items 1, 2, 6, 8, 9) Sch 2: 12 Apr 2007 (s 2(1) item 3) | Amended by No 45 of 2008, effective 26 June 2008 | Amended by No 70 of 2015, effective Sch 1 (items 65–108, 188–192, 195–205): 1 July 2015 (s 2(1) items 3, 4, 6) Sch 2 (items 17, 24–29, 34–39), Sch 6 (items 13–30, 32–38) and Sch 7 (items 1, 5–11): 25 June 2015 (s 2(1) items 7, 11, 13, 20) Sch 4 (items 1, 2) and Sch 5 (item 1): 26 June 2015 (s 2(1) items 7A, 8) Sch 4 (items 3, 4): 1 July 2025 (s 2(1) item 7B) Sch 6 (item 31): 29 June 2013 (s 2(1) item 12) The commencement date for amendments made by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 Sch 4 (items 1, 2) was retrospectively changed from 25 June 2015 to 26 June 2015 | Amended by No 64 of 2020, effective Sch 3 (items 72–122): 1 July 2020 (s 2(1) item 5) Sch 3 (items 228–239, 325, 326): 1 Oct 2020 (s 2(1) item 6) Sch 3 (items 327–330): 1 July 2017 (s 2(1) item 7)

s 207-50 — When a franked distribution flows indirectly to or through an entity

(1) For the purposes of this Subdivision, this section sets out the only circumstances in which a * franked distribution: (a) flows indirectly to an entity (subsection (2), (3) or (4)); or (b) flows indirectly through an entity (subsection (5)). Partners (2) A * franked distribution flows indirectly to a partner in a partnership in an income year if, and only if: (a) during that income year, the distribution is made to the partnership, or * flows indirectly to the partnership as a beneficiary because of a previous application of subsection (3); and (b) the partner has an individual interest: (i) in the partnership’s * net income for that income year that is covered by paragraph 92(1)(a) or (b) of the Income Tax Assessment Act 1936 ; or (ii) in a * partnership loss of the partnership for that income year that is covered by paragraph 92(2)(a) or (b) of that Act; (whether or not that individual interest becomes assessable income in the hands of the partner); and (c) the partner’s * share of the distribution under section 207 ‑ 55 is a positive amount (whether or not the partner actually receives any of that share). Beneficiaries (3) A * franked distribution flows indirectly to a beneficiary of a trust in an income year if, and only if: (a) during that income year, the distribution is made to the trustee of the trust, or * flows indirectly to the trustee as a partner or beneficiary because of a previous application of subsection (2) or this subsection; and (b) the beneficiary has this amount for that income year (the share amount ): (i) a share of the trust’s * net income for that income year that is covered by paragraph 97(1)(a) of the Income Tax Assessment Act 1936 ; or (ii) an individual interest in the trust’s net income for that income year that is covered by section 98A or 100 of that Act; (whether or not the share amount becomes assessable income in the hands of the beneficiary); and (c) the beneficiary’s * share of the distribution under section 207 ‑ 55 is a positive amount (whether or not the beneficiary actually receives any of that share). Trustees (4) A * franked distribution flows indirectly to the trustee of a trust in an income year if, and only if: (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). Note: A trustee to whom a franked distribution flows indirectly under this subsection is entitled to a tax offset under section 207 ‑ 45 and the distribution does not flow indirectly through the trustee to another entity. (5) A * franked distribution flows indirectly through an entity (the first entity ) to another entity if, and only if: (a) the other entity is the focal entity in an item of the table in section 207 ‑ 55 in relation to the distribution; and (b) that focal entity’s * share of the distribution is based on the first entity’s share of the distribution as an intermediary entity in that or another item of the table. Example: A franked distribution of $140 is made to a partnership. An amount equal to the franking credit on the distribution ($60) is included in the partnership’s assessable income under section 207 ‑ 35. Because the partnership has losses of $300 from other sources, it has a partnership loss of $100 for the income year. The partnership has 2 equal partners. One partner is the trustee of a trust and the other partner is an individual. The distribution flows indirectly to each partner under subsection (2). Each partner has a share of the partnership loss ($50), a share of the distribution under sections 207 ‑ 55 ($70) and a share of the franking credit under section 207 ‑ 57 ($30). The individual partner is allowed a tax offset of $30 under section 207 ‑ 45. Because the trust has $100 of income from other sources, it has a net income of $50 for that income year ($100 minus the share of the partnership loss of $50). The trust has one individual as a beneficiary, to whom the distribution flows indirectly under subsection (3). The beneficiary’s share of the franked distribution is therefore $70 under sections 207 ‑ 55 and its share of the franking credit is $30 under section 207 ‑ 57. The beneficiary is also allowed a tax offset of $30 under section 207 ‑ 45.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 79 of 2007, effective Schedule 1 (items 28, 29, 39–42, 43(1), (6)), Schedules 3, 4, Schedule 6 (items 3–8), Schedule 9 (items 14–26, 30, 34) and Schedule 10 (items 10–13, 32): Royal Assent Schedule 8 (items 2, 12–25, 26(1)–(3)): 1 July 2007 | Amended by No 62 of 2011, effective Sch 1 (items 1–3, 6–12, 14), Sch 2 (items 8–27, 45–51), Sch 3 (items 1–3, 9–19) and Sch 4 (items 33, 34): 29 June 2011 (s 2(1) items 2, 3, 5, 6) Sch 3 (items 4–8): 30 June 2011 (s 2(1) item 4)

s 207-55 — Share of a franked distribution

Object of section (1) The object of this section is to ensure that: (a) the amount of a * franked distribution made to a partnership or the trustee of a trust is allocated notionally amongst entities who * derive benefits from that distribution; and (b) that allocation corresponds with the way in which those benefits were derived. Note: An entity can derive a benefit from the distribution (and therefore has a share of the distribution) without actually receiving any of the distribution: see subsection (2) of this section and the example at the end of section 207 ‑ 50. (2) An entity’s share of a * franked distribution is an amount notionally allocated to the entity as its share of the distribution, whether or not the entity actually receives any of that distribution. (3) That amount is equal to the entity’s share of the distribution as the focal entity in column 3 of an item of the table. Note: An entity’s share of the distribution is based on the share of the distribution of each preceding intermediary entity through which the distribution flows, starting from the intermediary entity to whom the distribution is made. This means that in some cases (see items 2 and 4), more than one item of the table will need to be applied to work out the share of the distribution of an ultimate recipient of the distribution. Share of a franked distribution Item Column 1 For this intermediary entity and this focal entity : Column 2 The intermediary entity’s share of the franked distribution is: Column 3 The focal entity’s share of the franked distribution is: 1 a partnership is the intermediary entity and a partner in that partnership is the focal entity if: (a) a * franked distribution is made to the partnership; and (b) the partner has, in respect of the partnership, an individual interest mentioned in subsection 207 ‑ 50(2) the amount of the franked distribution so much of the franked distribution as is taken into account in working out the amount of that individual interest 2 a partnership is the intermediary entity and a partner in that partnership is the focal entity if: (a) a * franked distribution * flows indirectly to the partnership as a beneficiary of a trust; and (b) the partner has, in respect of the partnership, an individual interest mentioned in subsection 207 ‑ 50(2) the amount worked out under column 3 of item 3 or 4 of this table where the partnership, as a beneficiary, is the focal entity in that item so much of the amount worked out under column 2 of this item as is attributable to the partner, having regard to the partnership agreement and any other relevant circumstances 3 the trustee of a trust is the intermediary entity and the trustee or a beneficiary of the trust is the focal entity if: (a) a * franked distribution is made to the trustee; and (b) the trustee or beneficiary has, in respect of the trust, a share amount mentioned in subsection 207 ‑ 50(3) or (4) (a) if the trust has a positive amount of * net income for that year—the amount of the franked distribution; or (b) otherwise—nil the amount mentioned in subsection (4) 4 the trustee of a trust is the intermediary entity and the trustee or a beneficiary of the trust is the focal entity if: (a) a * franked distribution * flows indirectly to the trustee as a partner in a partnership or as a beneficiary of another trust; and (b) the trustee or beneficiary has, in respect of the trust, a share amount mentioned in subsection 207 ‑ 50(3) or (4) the amount worked out under column 3 of: (a) item 1 or 2 of this table where the trustee, as a partner, is the focal entity in that item; or (b) item 3 or a previous application of this item where the trustee, as a beneficiary, is the focal entity in that item so much of the amount worked out under column 2 of this item as is attributable to the focal entity in this item, having regard to the trust deed and any other relevant circumstances Note: In item 3 or 4, the trustee of a trust can be both the intermediary entity and the focal entity in the same item. (4) For the purposes of column 3 of item 3 of the table in subsection (3), the amount is the sum of: (a) so much of the amount worked out under column 2 of item 3 of the table in subsection (3) to which: (i) unless subparagraph (ii) applies—the focal entity is * specifically entitled; or (ii) if the focal entity is the trustee and has the share amount because of the operation of section 98 of the Income Tax Assessment Act 1936 in respect of a beneficiary (see subparagraph 207 ‑ 50(4)(b)(i))—the beneficiary is specifically entitled; and (b) if there is an amount of the * franked distribution to which no beneficiary is specifically entitled—that amount multiplied by: (i) unless subparagraph (ii) applies—the focal entity’s * adjusted Division 6 percentage of the income of the trust for the relevant income year; or (ii) if the focal entity is the trustee and has the share amount because of the operation of section 98 of the Income Tax Assessment Act 1936 in respect of a beneficiary (see subparagraph 207 ‑ 50(4)(b)(i))—the beneficiary’s adjusted Division 6 percentage of the income of the trust for the relevant income year.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 62 of 2011, effective Sch 1 (items 1–3, 6–12, 14), Sch 2 (items 8–27, 45–51), Sch 3 (items 1–3, 9–19) and Sch 4 (items 33, 34): 29 June 2011 (s 2(1) items 2, 3, 5, 6) Sch 3 (items 4–8): 30 June 2011 (s 2(1) item 4)

s 207-57 — Share of the franking credit on a franked distribution

(1) An entity’s share of a * franking credit on a * franked distribution is an amount notionally allocated to the entity as its share of that credit, whether or not the entity actually receives any of that credit or distribution. (2) Work out that amount as follows:

Amendment history: Inserted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23)

s 207-58 — Specifically entitled to an amount of a franked distribution

(1) A beneficiary of a trust estate is specifically entitled to an amount of a * franked distribution made to the trust estate in an income year equal to the amount calculated under the following formula: where: net financial benefit means an amount equal to the * financial benefit that is referable to the * franked distribution (after any application by the trustee of expenses that are directly relevant to the franked distribution). share of net financial benefit means an amount equal to the * financial benefit that, in accordance with the terms of the trust: (a) the beneficiary has received, or can be reasonably expected to receive; and (b) is referable to the * franked distribution (after application by the trustee of any expenses that are directly relevant to the franked distribution); and (c) is recorded, in its character as referable to the franked distribution, in the accounts or records of the trust no later than the end of the income year. (2) To avoid doubt, for the purposes of subsection (1), something is done in accordance with the terms of the trust if it is done in accordance with: (a) the exercise of a power conferred by the terms of the trust; or (b) the terms of the trust deed (if any), and the terms applicable to the trust because of the operation of legislation, the common law or the rules of equity.

Amendment history: Inserted by No 62 of 2011, effective Sch 1 (items 1–3, 6–12, 14), Sch 2 (items 8–27, 45–51), Sch 3 (items 1–3, 9–19) and Sch 4 (items 33, 34): 29 June 2011 (s 2(1) items 2, 3, 5, 6) Sch 3 (items 4–8): 30 June 2011 (s 2(1) item 4)

s 207-59 — Franked distributions within class treated as single franked distribution

(1) Subsection (2) applies if: (a) a trust receives 2 or more * franked distributions in an income year; and (b) all of the franked distributions that the trust receives in the income year are, in accordance with the terms of the trust, to the extent that they are distributed in that income year, distributed within a single class. (2) For the purposes of this Subdivision and Division 6E of Part III of the Income Tax Assessment Act 1936 , treat all of the * franked distributions that the trust receives in the income year as one single franked distribution. (3) To avoid doubt, for the purposes of subsection (1), something is done in accordance with the terms of the trust if it is done in accordance with: (a) the exercise of a power conferred by the terms of the trust; or (b) the terms of the trust deed (if any), and the terms applicable to the trust because of the operation of legislation, the common law or the rules of equity.

Amendment history: Inserted by No 62 of 2011, effective Sch 1 (items 1–3, 6–12, 14), Sch 2 (items 8–27, 45–51), Sch 3 (items 1–3, 9–19) and Sch 4 (items 33, 34): 29 June 2011 (s 2(1) items 2, 3, 5, 6) Sch 3 (items 4–8): 30 June 2011 (s 2(1) item 4) | Amended by No 12 of 2012, effective s 4, Sch 2 (items 1–23), Sch 5 and Sch 6 (items 3–6, 11–20, 25, 26, 35–67, 74–83, 94–96, 117–142, 157–178, 183, 200–203, 214–217, 235–240, 248): 21 Mar 2012 (s 2(1) items 1, 3, 5, 6, 10, 14, 18, 19, 27, 31) Sch 6 (item 7): 1 July 2007 (s 2(1) item 7) Sch 6 (item 10): 1 July 2010 (s 2(1) item 9) Sch 6 (items 106–116): 22 Mar 2012 (s 2(1) items 16, 17) Sch 6 (item 143): 22 Jan 2013 (s 2(1) item 20) Sch 6 (items 146–148): never commenced (s 2(1) item 23) Sch 6 (items 179, 181): 3 Oct 2008 (s 2(1) items 28, 30) Sch 6 (item 180): 3 June 2010 (s 2(1) item 29)

s 207-60 — What this Subdivision is about

Some recipients of a franked distribution must satisfy a residency requirement if their assessable income is to include the franking credit on the distribution, and they are to be entitled to a tax offset, under the general rule. Table of sections 207 ‑ 65 Satisfying the residency requirement Operative provisions 207 ‑ 70 Gross ‑ up and tax offset under section 207 ‑ 20 207 ‑ 75 Residency requirement

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 207-65 — Satisfying the residency requirement

(1) This Subdivision sets out the residency requirements that must be satisfied by an individual or a corporate tax entity that receives a franked distribution, if the franking credit on the distribution is to be included in that entity’s assessable income, or the entity is to be entitled to a tax offset, under the general rule. (2) It does not impose a residency requirement on other entities, because the significance of residency for those entities is dealt with elsewhere in this Act. (3) It does not impose a residency requirement where a distribution flows indirectly to an entity. This is also because the significance of residency is dealt with elsewhere, for the most part in Divisions 5 and 6 of Part III of the Income Tax Assessment Act 1936 .

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 207-70 — Gross ‑ up and tax offset under section 207 ‑ 20

If an entity makes a * franked distribution to an individual or a * corporate tax entity: (a) no amount is included in the receiving entity’s assessable income under subsection 207 ‑ 20(1); and (b) the receiving entity is not entitled to a * tax offset under subsection 207 ‑ 20(2); unless the receiving entity satisfies the * residency requirement at the time the distribution is made.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002

s 207-75 — Residency requirement

(1) An entity that receives a * distribution satisfies the residency requirement at the time the distribution is made if: (a) in the case of an individual—the individual is an Australian resident at that time; and (b) in the case of a company—the company is an Australian resident at that time; and (c) in the case of a * corporate limited partnership—the corporate limited partnership is an Australian resident at that time; and (e) in the case of a * public trading trust—the public trading trust is a resident unit trust for the income year in which that time occurs. (2) An entity that receives a * distribution also satisfies the residency requirement at the time the distribution is made if the entity at that time: (a) is a company or an individual; and (b) is a foreign resident; and (c) carries on business in Australia at or through a permanent establishment of the entity in Australia, being a permanent establishment within the meaning of: (i) a double tax agreement (as defined in Part X of the Income Tax Assessment Act 1936 ) that relates to a foreign country and affects the entity; or (ii) subsection 6(1) of that Act, if there is no such agreement; and the distribution is attributable to the permanent establishment.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 64 of 2005, effective Schedule 2: 27 June 2005 Schedule 5: 29 June 2004 Remainder: Royal Assent | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4)

s 207-80 — What this Subdivision is about

This Subdivision creates the appropriate adjustment to cancel the effect of the gross ‑ up and tax offset rules where a franked distribution (or a share of it) is, or would be, exempt income or * non ‑ assessable non ‑ exempt income in the relevant entity’s hands (and therefore would not be taxed in any case). Table of sections Operative provisions 207 ‑ 85 Applying this Subdivision 207 ‑ 90 Distribution that is made to an entity 207 ‑ 95 Distribution that flows indirectly to an entity

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23)

s 207-85 — Applying this Subdivision

This Subdivision applies subject to Subdivisions 207 ‑ E and 207 ‑ F. Note 1: Subdivision 207 ‑ E sets out exceptions to the rules in this Subdivision. Note 2: Where both this Subdivision and Subdivision 207 ‑ F apply to an entity, the application of this Subdivision is subject to the rules in Subdivision 207 ‑ F: see subsections 207 ‑ 145(3) and 207 ‑ 150(7) and (8).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23)

s 207-90 — Distribution that is made to an entity

Whole of distribution not assessable (1) If: (a) a * franked distribution is made to an entity; and (b) the distribution does not * flow indirectly through the entity to another entity; and (c) the distribution is * exempt income or * non ‑ assessable non ‑ exempt income in the hands of the entity; then, for the purposes of this Act: (d) the amount of the * franking credit on the distribution is not included in the assessable income of the entity under section 207 ‑ 20; and (e) the entity is not entitled to a * tax offset under this Division because of the distribution. Part of distribution not assessable (2) If: (a) a * franked distribution is made to an entity; and (b) the distribution does not * flow indirectly through the entity to another entity; and (c) a part of the distribution (the relevant part ) is * exempt income or * non ‑ assessable non ‑ exempt income in the hands of the entity; then, for the purposes of this Act: (d) the amount of the distribution is taken to have been reduced by the relevant part; and (e) the amount of the * franking credit on the distribution is to be worked out as follows:

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed and substituted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23)