Income Tax Assessment Act 1997

s 207-95 — Distribution that flows indirectly to an entity

Whole of share of distribution not assessable (1) If: (a) a * franked distribution * flows indirectly to an entity in an income year; and (b) the entity’s * share of the distribution would, in its hands, be * exempt income or * non ‑ assessable non ‑ exempt income (whether or not it had actually received that share); then, for the purposes of this Act: (c) subsection (2), (3) or (4) (as appropriate) applies to the entity in relation to that income year; and (d) the entity is not entitled to a * tax offset under this Division because of the distribution; and (e) if the distribution flows indirectly through the entity to another entity—subsection 207 ‑ 35(3) and section 207 ‑ 45 do not apply to that other entity. Note: This section can therefore apply, for example, where the entity is a partner in a partnership that has a partnership loss and the entity does not actually receive any of the distribution. Partner (2) If the * franked distribution * flows indirectly to the entity as a partner in a partnership under subsection 207 ‑ 50(2), the entity can deduct an amount for that income year that is equal to its * share of the * franking credit on the distribution. Beneficiary (3) If the * franked distribution * flows indirectly to the entity as a beneficiary of a trust under subsection 207 ‑ 50(3), the entity can deduct an amount for that income year that is equal to the lesser of: (a) its share amount in relation to the distribution that is mentioned in that subsection; and (b) its * share of the * franking credit on the distribution. Trustee (4) If the * franked distribution * flows indirectly to the entity as the trustee of a trust under subsection 207 ‑ 50(4), the entity’s share amount in relation to the distribution that is mentioned in that subsection is to be reduced by the lesser of: (a) that share amount; and (b) its * share of the * franking credit on the distribution. Example: A franked distribution of $70 is made to a partnership. Under section 207 ‑ 35, an additional amount of $30 is included in the partnership’s assessable income because of the distribution. The partnership has 2 equal partners, X and Y. X is a foreign resident individual whose share of partnership’s net income for the income year is $50 (share of distribution of $35 and share of franking credit of $15). That share of distribution is not assessable income and not exempt income under section 128D of the Income Tax Assessment Act 1936 . X’s assessable income of $15 (share of franking credit) is reduced to nil because of the deduction of $15 under subsection (2). Because of subsection (1), X is not entitled to a tax offset under section 207 ‑ 45. Part of share of distribution not assessable (5) If: (a) a * franked distribution * flows indirectly to an entity in an income year; and (b) a part of the entity’s * share of the distribution (the relevant part ) would, in its hands, be * exempt income or * non ‑ assessable non ‑ exempt income(whether or not it had actually received that part); then, subsection (2), (3) or (4) (as appropriate) applies to the entity on the basis that the amount of its * share of the * franking credit on the distribution is worked out as follows: (6) In addition, the following apply to an entity covered by subsection (5): (a) if the distribution would otherwise * flow indirectly through the entity—the entity’s * share of the distribution for the purposes of this Act (other than subsection (2), (3) or (4)) is to be reduced by the relevant part mentioned in subsection (5); (b) if the entity would otherwise be entitled to a * tax offset under this Division because of the distribution—the amount of the tax offset 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) | 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 68 of 2014, effective Sch 3: 30 June 2014 (s 2(1) item 2)

s 207-105 — What this Subdivision is about

Subdivision 207 ‑ D does not apply to certain exempt institutions, trusts and life insurance companies as set out in this Subdivision. Such an entity may be entitled to a tax offset under this Subdivision in relation to a franked distribution. Table of sections Operative provisions 207 ‑ 110 Effect of non ‑ assessable income on gross up and tax offset Exempt institutions 207 ‑ 115 Which exempt institutions are eligible for a refund? 207 ‑ 117 Residency requirement 207 ‑ 119 Entity not treated as exempt institution eligible for refund in certain circumstances 207 ‑ 120 Entity may be ineligible because of a distribution event 207 ‑ 122 Entity may be ineligible if distribution is in the form of property other than money 207 ‑ 124 Entity may be ineligible if other money or property also acquired 207 ‑ 126 Entity may be ineligible if distributions do not match trust share amounts 207 ‑ 128 Reinvestment choice 207 ‑ 130 Controller’s liability 207 ‑ 132 Treatment of benefits provided by an entity to a controller 207 ‑ 134 Entity’s present entitlement disregarded in certain circumstances 207 ‑ 136 Review of certain decisions

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 207-110 — Effect of non ‑ assessable income on gross up and tax offset

(1) This section applies to an entity to whom a * franked distribution is made, or * flows indirectly, in any of the following circumstances: (a) the entity is an * exempt institution that is eligible for a refund and the distribution does not flow indirectly to the entity as a partner in a partnership under subsection 207 ‑ 50(2); (b) the distribution is, or the entity’s * share of the distribution would have been, this kind of income in its hands: (i) * exempt income under section 295 ‑ 385 (about income from assets set aside to meet current pension liabilities), section 295 ‑ 390 (about income from other assets used to meet current pension liabilities) or section 295 ‑ 400 (about income of a PST attributable to current pension liabilities); or (ii) * non ‑ assessable non ‑ exempt income under paragraph 320 ‑ 37(1)(a) (segregated exempt assets of a life insurance company) or paragraph 320 ‑ 37(1)(d) (certain amounts received by a friendly society) of this Act. (2) The following have effect in relation to the entity: (a) section 207 ‑ 90 or 207 ‑ 95 (as appropriate) does not apply to the entity; (b) if the entity would, apart from section 207 ‑ 90 or 207 ‑ 95, be entitled to a * tax offset under section 207 ‑ 20 or 207 ‑ 45 in relation to the distribution—the entity is entitled to that tax offset; (c) if the entity would not be entitled to such a tax offset, the entity is entitled to a tax offset under this section that is equal to: (i) if the distribution is made to the entity—the * franking credit on the distribution; or (ii) if the distribution * flows indirectly to the entity—the entity’s * share of the franking credit on the distribution; (d) if the distribution flows indirectly through the entity to another entity—subsection 207 ‑ 35(3) and section 207 ‑ 45 do not apply to that other entity. Note: Paragraph (2)(c) only applies to an exempt institution that is eligible for a refund and that is not entitled to a tax offset under section 207 ‑ 20 or 207 ‑ 45. An entity covered by paragraph (1)(b) will, in all cases, be entitled to a tax offset under section 207 ‑ 20 or 207 ‑ 45.

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) | 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 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)

s 207-115 — Which exempt institutions are eligible for a refund?

(1) This section sets out the only circumstances in which an entity is an exempt institution that is eligible for a refund . Income tax exempt charities (2) An entity is an exempt institution that is eligible for a refund if it: (a) is covered by item 1.1 of the table in section 50 ‑ 5; and (b) is endorsed as exempt from income tax under Subdivision 50 ‑ B; and (c) satisfies the * residency requirement. Income tax exempt deductible gift recipients (3) An entity is an exempt institution that is eligible for a refund if it: (a) is endorsed under paragraph 30 ‑ 120(a); and (b) satisfies the * residency requirement. Income tax exempt specified deductible gift recipients (4) An entity is an exempt institution that is eligible for a refund if: (a) the entity’s name is specified in a table in a section in Subdivision 30 ‑ B; and (b) it has an ABN; and (c) it satisfies the * residency requirement. Income tax exempt subsidiaries of the Future Fund Board (5A) An entity is an exempt institution that is eligible for a refund if it is covered by item 5.4 of the table in section 50 ‑ 25. Prescribed income tax exempt entities (6) An entity is an exempt institution that is eligible for a refund if the entity is prescribed as an exempt institution that is eligible for a refund by the regulations. (7) This section has effect subject to sections 207 ‑ 119 to 207 ‑ 136.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Repealed 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 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | Amended by No 63 of 2005, effective Schedule 1 (items 5–23): Royal Assent | 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 169 of 2012, effective Sch 2 (items 4–23, 28–39, 187–189) and Sch 4 (items 4–7): 3 Dec 2012 (s. 2(1) items 3, 7, 12) Sch 4 (items 8–10, 21, 22): never commenced (s 2(1) items 13, 14) Sch 5: 4 Dec 2012 (s 2(1) item 15) | Amended by No 96 of 2013, effective Sch 1 (items 23–37): 1 Jan 2014 (s 2(1) item 2) | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7) | Amended by No 40 of 2023, effective sch 2, sch 4 (items 14-16): 1 July 2023 (s 2(1) items 3, 5) sch 3: 1 Jan 2024 (s 2(1) item 4)

s 207-117 — Residency requirement

An entity satisfies the residency requirement for the purposes of determining whether, at the time a * franked distribution is made, the entity is an * exempt institution that is eligible for a refund if: (a) the entity has a physical presence in Australia; and (b) to that extent, incurs its expenditure and pursues its objectives principally in Australia; at all times during the income year in which the distribution is made.

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-119 — Entity not treated as exempt institution eligible for refund in certain circumstances

For the purposes of this Act: (a) an entity must not be treated as an * exempt institution that is eligible for a refund in relation to a * franked distribution if section 207 ‑ 120, 207 ‑ 122 or 207 ‑ 124 applies to the entity in relation to the distribution; and (b) a beneficiary of a trust must not be treated as an exempt institution that is eligible for a refund in relation to a franked distribution made in an income year if section 207 ‑ 126 applies to the beneficiary in relation to that income year.

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-120 — Entity may be ineligible because of a distribution event

(1) This section applies to an entity (the ineligible entity ) if: (a) a * franked distribution is made, or * flows indirectly under subsection 207 ‑ 50(3) or (4), to the entity; and (b) subsection (2) of this section applies because of a * distribution event in relation to the distribution. (2) Subject to subsection (3) and to section 207 ‑ 128, this subsection applies if, because of a * distribution event in relation to the * franked distribution: (a) the ineligible entity or another entity: (i) makes, becomes liable to make, or may reasonably be expected to make or to become liable to make, a payment to any entity; or (ii) transfers, becomes liable to transfer, or may reasonably be expected to transfer or to become liable to transfer, any property to any entity; or (iii) incurs, becomes liable to incur, or may reasonably be expected to incur or to become liable to incur, any other detriment, disadvantage, liability or obligation; or (b) if the distribution is made to the ineligible entity—the amount or value of the benefit * derived by the ineligible entity from the distribution is, will be, or may reasonably be expected to be, less than the amount or value of the distribution as at the time the distribution is made; or (c) if the distribution * flows indirectly to the ineligible entity—the amount or value of the benefit derived by the ineligible entity from the ineligible entity’s * trust share amount in relation to the distribution is, will be, or may reasonably be expected to be, less than the amount or value of the ineligible entity’s trust share amount in relation to the distribution as at the time when that amount arises; or (d) any of the following entities has obtained, will obtain or may reasonably be expected to obtain, a benefit, advantage, right or privilege: (i) the entity making the distribution; (ii) an entity through which the distribution flows indirectly to the ineligible entity; (iii) an * associate of any of those entities. Note: For when paragraph (d) is satisfied, see also subsection 207 ‑ 132(2). Exception to paragraph (2)(b) or (c) (3) Paragraph (2)(b) or (c) does not apply if: (a) that paragraph would otherwise apply only because of expenses the ineligible entity has incurred, will incur, or may reasonably be expected to incur, for the purpose of obtaining the * franked distribution or * trust share amount mentioned in that paragraph; and (b) the Commissioner considers the expenses to be reasonable. Trust share amount (4) An entity’s trust share amount in relation to a * franked distribution that * flows indirectly to the entity under subsection 207 ‑ 50(3) or (4) is the entity’s share amount that is mentioned in that subsection. Distribution event (5) A distribution event in relation to a * franked distribution is an act, transaction or circumstance that has happened, will happen, or may reasonably be expected to happen, as part of, in relation to or as a result of: (a) the payment or receipt of the distribution; or (b) if the distribution * flows indirectly to an entity under subsection 207 ‑ 50(3) or (4)—the arising of, or the distribution or receipt of, the entity’s * trust share amount in relation to the distribution; or (c) an * arrangement entered into in association with a matter mentioned in paragraph (a) or (b).

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 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) | Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | 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 207-122 — Entity may be ineligible if distribution is in the form of property other than money

This section applies to an entity (the ineligible entity ) to whom a * franked distribution is made, or * flows indirectly under subsection 207 ‑ 50(3) or (4), if: (a) one of the following is in the form of property other than money: (i) if the distribution is made to the ineligible entity—all or part of the distribution; (ii) if the distribution flows indirectly to the ineligible entity through the trustee of a trust under subsection 207 ‑ 50(3) or (4)—all or a part of a distribution (the trust distribution ) made by the trustee of the trust that relates to the ineligible entity’s * trust share amount in relation to the franked distribution; and (b) the terms and conditions on which the franked distribution or trust distribution is made are such that the ineligible entity: (i) does not receive immediate custody and control of the property; or (ii) does not have the unconditional right to retain custody and control of the property in perpetuity; or (iii) does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property.

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-124 — Entity may be ineligible if other money or property also acquired

Subject to section 207 ‑ 128, this section applies to an entity (the ineligible entity ) to whom a * franked distribution is made, or * flows indirectly under subsection 207 ‑ 50(3) or (4), if: (a) the ineligible entity or another entity has entered into an * arrangement as part of, or in association with: (i) the distribution; or (ii) if the distribution flows indirectly to the ineligible entity—the ineligible entity’s * trust share amount in relation to the distribution; and (b) because of the arrangement, the ineligible entity or another entity has acquired or will acquire (whether directly or indirectly) money or property, other than money or property comprising the distribution or the ineligible entity’s trust share amount, from: (i) the entity making the distribution; or (ii) an entity through which the distribution flows indirectly to the ineligible entity; or (iii) an * associate of any of those entities (other than the ineligible entity).

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-126 — Entity may be ineligible if distributions do not match trust share amounts

(1) This section applies to a beneficiary of a trust in relation to an income year if: (a) the sum of the distributions: (i) made to the beneficiary during the income year by the trustee of the trust; and (ii) that relate to the beneficiary’s * trust share amount in relation to a * franked distribution made during the income year; is less than: (b) that trust share amount. Commissioner’s power to treat trust share amount as having been distributed during the income year (2) Subsection (1) does not apply if the Commissioner, having regard to all the circumstances, considers that it would be reasonable to treat the * trust share amount as having been distributed to the beneficiary in the income year.

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-128 — Reinvestment choice

(1) If, apart from this section, paragraph 207 ‑ 120(2)(a) or (d) or section 207 ‑ 124 would apply to an entity (the receiving entity ) to whom a * franked distribution is made or * flows indirectly, that paragraph or section is taken not to apply to the receiving entity if: (a) instead of receiving the distribution, or the * trust share amount concerned, by a payment of money, the receiving entity chooses to be issued with: (i) if the distribution is made to the receiving entity— * shares in the * corporate tax entity making the distribution; or (ii) if the distribution flows indirectly to the receiving entity—a fixed interest in the trust in relation to which the trust share amount arises; and (b) the choice is genuine and furthers the purpose for which the entity was established; and (c) the choice is not made for the purpose, or purposes that include the purpose, of benefiting the corporate tax entity, trust or any of their * associates (other than the receiving entity); and (d) any benefit * derived by the corporate tax entity, trust or any of their associates (other than the receiving entity) because of that choice is one which is an ordinary incident of issuing the shares or interests to the receiving entity or of the receiving entity’s holding of those shares or interests; and (e) the parties that were involved in the * distribution event or * arrangement concerned deal with one another on an * arm’s length basis in relation to the event or arrangement. A vested and indefeasible interest constitutes a fixed interest (2) The receiving entity’s interest in a trust is a fixed interest if the interest is a vested and indefeasible interest in the trust’s capital. Special rule about whether interests in unit trusts are defeasible (3) If: (a) the trust is a unit trust and the receiving entity holds units in the unit trust; and (b) the units are redeemable or further units are able to be issued; and (c) the units held by the receiving entity will be redeemed, or any further units will be issued: (i) if units in the unit trust are listed for quotation in the official list of an * approved stock exchange—for the price at which other units of the same kind in the unit trust are offered for sale on the exchange at the time of the redemption or issue; or (ii) if the units are not listed as mentioned in subparagraph (i)—for their * market value at the time of the redemption or issue; then the mere fact that the units are redeemable, or that the further units are able to be issued, does not mean that the receiving entity’s interest, as a unit holder, in the trust’s capital is defeasible. Commissioner’s power to treat an interest in a trust as being a fixed interest (4) If: (a) the receiving entity has an interest in the trust’s capital; and (b) apart from this subsection, the interest would not be a vested or indefeasible interest; and (c) the Commissioner considers that the interest should be treated as being vested and indefeasible, having regard to: (i) the circumstances in which the interest is capable of not vesting, or the defeasance can happen; and (ii) the likelihood of the interest not vesting or the defeasance happening; and (iii) the nature of the trust; and (iv) any other matter the Commissioner thinks relevant; the Commissioner may determine that the interest is to be taken to be vested and indefeasible. (5) A determination made under subsection (4) has effect according to its terms.

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | 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 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)

s 207-130 — Controller’s liability

(1) A * controller (for imputation purposes) of an entity (the controlled entity ) is liable to pay an amount under this section in respect of a refund paid to the controlled entity under Division 67 if: (a) the controlled entity claimed the refund wholly or partly on the basis that: (i) the controlled entity was entitled to a * tax offset under section 207 ‑ 20, 207 ‑ 45 or 207 ‑ 110 in relation to a * franked distribution; and (ii) the controlled entity was an * exempt institution that is eligible for a refund; and (b) because of the operation of section 207 ‑ 120, 207 ‑ 122, 207 ‑ 124 or 207 ‑ 126 in respect of a * distribution event or an * arrangement in relation to the distribution, the controlled entity is not entitled to the tax offset; and (c) the controller or an * associate of the controller benefited from that event or arrangement; and (d) some or all of the amount that the controlled entity is liable to pay in respect of the refund remains unpaid after the day on which the amount becomes due and payable; and (e) the Commissioner gives the controller written notice: (i) stating that the controller is liable to pay an amount under this section; and (ii) specifying that amount. Except as provided for in subsection (5), this subsection does not affect any liability the controlled entity has in relation to the refund. Note 1: Section 207 ‑ 134 also provides that the controlled entity’s present entitlement to a trust share amount is disregarded for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 . Note 2: For when paragraph (c) is satisfied, see also subsection 207 ‑ 132(3). (2) The amount that the * controller (for imputation purposes) is liable to pay under subsection (1): (a) is the amount specified under subparagraph (1)(e)(ii); and (b) becomes due and payable at the end of the period of 14 days that starts on the day on which the notice mentioned in paragraph (1)(e) is given. (3) The amount that the * controller (for imputation purposes) is liable to pay under subsection (1) must not exceed the total amount or value of the benefit that the controller and its * associates obtained from the * distribution event or * arrangement. (4) The total of: (a) the amounts that the Commissioner recovers under subsection (1) in relation to the refund from all of the controlled entity’s * controllers (for imputation purposes); and (b) the amounts that the Commissioner recovers in relation to the refund from the controlled entity; must not exceed the amount that the controlled entity was liable to pay as mentioned in paragraph (1)(d). Controller of a company (5) An entity is a controller (for imputation purposes) of a company if the entity is a * controller of the company (for CGT purposes). Controller of an entity other than a company—basic meaning (6) Subject to subsections (7) and (8), an entity is a controller (for imputation purposes) of an entity other than a company (the controlled entity ) if: (a) a group in relation to the entity has the power, by means of the exercise of a power of appointment or revocation or otherwise, to obtain beneficial enjoyment (directly or indirectly) of the capital or income of the controlled entity; or (b) a group in relation to the entity is able (directly or indirectly) to control the application of the capital or income of the controlled entity; or (c) a group in relation to the entity is capable, under a * scheme, of gaining the beneficial enjoyment mentioned in paragraph (a) or the control mentioned in paragraph (b); or (d) the controlled entity or, if the controlled entity is a trust, the trustee of the trust: (i) is accustomed; or (ii) is under an obligation; or (iii) might reasonably be expected; to act in accordance with the directions, instructions or wishes of a group in relation to the entity; or (e) if the controlled entity is a trust—a group in relation to the entity is able (directly or indirectly) to remove or appoint the trustee of the trust; or (f) a group in relation to the entity has * more than a 50% stake in the income or capital of the controlled entity; or (g) entities in a group in relation to the entity are the only entities that, under the terms of: (i) the constitution of the controlled entity or the terms on which the controlled entity is established; or (ii) if the controlled entity is a trust—the terms of the trust; can obtain the beneficial enjoyment of the income or capital of the controlled entity. Group in relation to an entity (7) For the purposes of subsection (6), each of the following constitutes a group in relation to an entity: (a) the entity acting alone; (b) an * associate of the entity acting alone; (c) the entity and one or more associates of the entity acting together; (d) 2 or more associates of the entity acting together. Commissioner’s power to take an entity not to be a controller (for imputation purposes) (8) If: (a) at a particular time, an entity (the first entity ) would, but for this subsection, be a * controller (for imputation purposes) of an entity other than a company (the second entity ); and (b) the Commissioner, having regard to all relevant circumstances, considers that it is reasonable that the first entity be taken not to be such a controller of the second entity at the particular time; the first entity is taken not to be a controller (for imputation purposes) of the second entity at the particular time. (9) Without limiting paragraph (8)(b), if the second entity is a trust, the Commissioner may have regard under that paragraph to the identity of the beneficiaries of the trust at any time (whether before or after the first entity began to be a * controller (for imputation purposes) of the second entity).

Amendment history: Inserted by No 48 of 2002, effective 29 June 2002 | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | 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 207-132 — Treatment of benefits provided by an entity to a controller

(1) This section applies in relation to a benefit (the relevant benefit ) given by an entity to a * controller (for imputation purposes) of the entity, or to an * associate of such a controller, if: (a) the controller or associate: (i) makes a * franked distribution to the entity; or (ii) is the trustee of the trust in relation to which a * trust share amount of the entity arises in relation to a franked distribution that * flows indirectly to the entity; and (b) the benefit is, or was, given to the controller or associate at any time during the period that starts 3 years before, and ends 3 years after, the distribution is made or the trust share amount arises (as appropriate). (2) For the purposes of paragraph 207 ‑ 120(2)(d), the controller or * associate is taken to have obtained the relevant benefit because of a * distribution event in relation to the * franked distribution or * trust share amount. (3) For the purposes of paragraph 207 ‑ 130(1)(c), and at least to the extent of the relevant benefit, the controller or * associate is taken to have benefited from a * distribution event or * arrangement that caused section 207 ‑ 120 to apply in relation to the * franked distribution or * trust share amount. Commissioner’s power not to apply subsection (2) or (3) (4) Subsection (2) or (3) does not apply in relation to a benefit if the Commissioner is satisfied, having regard to all the circumstances, that it would be unreasonable to apply that subsection.

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-134 — Entity’s present entitlement disregarded in certain circumstances

The present entitlement of a beneficiary of a trust to a share of trust income is disregarded for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 if: (a) the beneficiary has claimed a * tax offset under section 207 ‑ 45 or 207 ‑ 110 of this Act on the basis that the beneficiary was an * exempt institution that was eligible for a refund in relation to a * trust share amount that is that share of trust income; but (b) the beneficiary was not entitled to that tax offset because of the operation of section 207 ‑ 120, 207 ‑ 122, 207 ‑ 124 or 207 ‑ 126 in respect of a * distribution event, or an * arrangement, to which the trust share amount is related. Note: This means that the trustee of the trust is liable to pay income tax on that share of the trust income.

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-136 — Review of certain decisions

An entity that is dissatisfied with a decision of the Commissioner under any of the following provisions may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953 : (a) paragraph 207 ‑ 120(3)(b); (b) subsection 207 ‑ 126(2); (c) subsection 207 ‑ 128(4); (d) paragraph 207 ‑ 130(1)(e); (e) paragraph 207 ‑ 130(8)(b); (f) subsection 207 ‑ 132(4).

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 207-140 — What this Subdivision is about

This Subdivision creates the appropriate adjustment to cancel the effect of the gross ‑ up and tax offset rules where the entity concerned has manipulated the imputation system in a manner that is not permitted under the income tax law. Table of sections Operative provisions 207 ‑ 145 Distribution that is made to an entity 207 ‑ 150 Distribution that flows indirectly to an entity 207 ‑ 155 When is a distribution made as part of a dividend stripping operation? 207 ‑ 157 Distribution washing 207 ‑ 158 Distributions entitled to a foreign income tax deduction 207 ‑ 159 Distributions funded by capital raising 207 ‑ 160 Distribution that is treated as an interest payment

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 207-145 — Distribution that is made to an entity

Whole of distribution manipulated (1) If a * franked distribution is made to an entity in one or more of the following circumstances: (a) the entity is not a qualified person in relation to the distribution for the purposes of Division 1A of former Part IIIAA of the Income Tax Assessment Act 1936 ; (b) the Commissioner has made a determination under paragraph 177EA(5)(b) of that Act that no imputation benefit (within the meaning of that section) is to arise in respect of the distribution for the entity; (c) the Commissioner has made a determination under paragraph 204 ‑ 30(3)(c) of this Act that no * imputation benefit is to arise in respect of the distribution for the entity; (d) the distribution is made as part of a * dividend stripping operation; (da) the distribution is one to which section 207 ‑ 157 (which is about distribution washing) applies; (db) the distribution is one to which section 207 ‑ 158 (which is about foreign income tax deductions) applies; then, for the purposes of this Act: (e) the amount of the * franking credit on the distribution is not included in the assessable income of the entity under section 207 ‑ 20 or 207 ‑ 35; and (f) the entity is not entitled to a * tax offset under this Division because of the distribution; and (g) if the distribution * flows indirectly through the entity to another entity—subsection 207 ‑ 35(3) and section 207 ‑ 45 do not apply to that other entity. Part of share of distribution manipulated (2) If: (a) a * franked distribution is made to an entity; and (b) the Commissioner makes a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution (the specified part ) for the entity; then, for the purposes of this Act: (c) the amount of the distribution is taken to have been reduced by the specified part; and (d) the amount of the * franking credit on the distribution is to be worked out as follows: Example: A franked distribution of $70 is made to the trustee of a trust. Apart from this section, the franking credit on the distribution ($30) would be included in the assessable income of the trust under section 207 ‑ 35. The Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise for the trustee in respect of $49 of the distribution. Under this subsection, the amount included in the assessable income of the trust under section 207 ‑ 35 because of the distribution is reduced from $30 to $9. If there is a beneficiary of the trust that is presently entitled to the trust’s income, the amount of the distribution that flows indirectly to the beneficiary is reduced from $70 to $21 under this subsection. What happens if both subsection 207 ‑ 90(2) and subsection (2) of this section would apply (3) If, apart from this subsection, both subsection 207 ‑ 90(2) and subsection (2) of this section would apply to an entity in relation to a * franked distribution, then: (a) apply subsection 207 ‑ 90(2) first; and (b) apply subsection (2) of this section on the basis that the amount of the * franked distribution had been reduced under subsection 207 ‑ 90(2).

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 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 68 of 2014, effective Sch 3: 30 June 2014 (s 2(1) item 2) | Amended by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 207-150 — Distribution that flows indirectly to an entity

Whole of share of distribution manipulated (1) If a * franked distribution * flows indirectly to an entity in an income year in one or more of the following circumstances: (a) the entity is not a qualified person in relation to the distribution for the purposes of Division 1A of former Part IIIAA of the Income Tax Assessment Act 1936 ; (b) the Commissioner has made a determination under paragraph 177EA(5)(b) of that Act that no imputation benefit (within the meaning of that section) is to arise in respect of the distribution for the entity; (c) the Commissioner has made a determination under paragraph 204 ‑ 30(3)(c) of this Act that no * imputation benefit is to arise in respect of the distribution for the entity; (d) the distribution is treated as an interest payment for the entity under section 207 ‑ 160 of this Act; (e) the distribution is made as part of a * dividend stripping operation; (ea) the distribution is one to which section 207 ‑ 157 (which is about distribution washing) applies; (eb) the distribution is one to which section 207 ‑ 158 (which is about foreign income tax deductions) applies; then, for the purposes of this Act: (f) subsection (2), (3) or (4) (as appropriate) applies to the entity in relation to that income year; and (g) the entity is not entitled to a * tax offset under this Division because of the distribution; and (h) if the distribution * flows indirectly through the entity to another entity—subsection 207 ‑ 35(3) and section 207 ‑ 45 do not apply to that other entity. Partner (2) If the * franked distribution * flows indirectly to the entity as a partner in a partnership under subsection 207 ‑ 50(2), the entity can deduct an amount for that income year that is equal to its * share of the * franking credit on the distribution. Beneficiary (3) If the * franked distribution * flows indirectly to the entity as a beneficiary of a trust under subsection 207 ‑ 50(3), the entity can deduct an amount for that income year that is equal to the lesser of: (a) its share amount in relation to the distribution that is mentioned in that subsection; and (b) its * share of the * franking credit on the distribution. Trustee (4) If the * franked distribution * flows indirectly to the entity as the trustee of a trust under subsection 207 ‑ 50(4), the entity’s share amount in relation to the distribution that is mentioned in that subsection is to be reduced by the lesser of: (a) that share amount; and (b) its * share of the * franking credit on the distribution. Part of share of distribution manipulated (5) If: (a) a * franked distribution * flows indirectly to an entity in an income year; and (b) the Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution (the specified part ) for the entity; then, subsection (2), (3) or (4) (as appropriate) applies to the entity on the basis that the amount of its * share of the * franking credit on the distribution is worked out as follows: (6) In addition, the following apply to an entity covered by subsection (5): (a) if the distribution would otherwise * flow indirectly through the entity—the entity’s * share of the distribution for the purposes of this Act (other than subsection (2), (3) or (4)) is to be reduced by the specified part mentioned in subsection (5); (b) if the entity would otherwise be entitled to a * tax offset under this Division because of the distribution—the amount of the tax offset is to be worked out as follows: Example: X is a partner in a partnership to which a franked distribution of $140 is made. The franking credit on the distribution ($60) is included in the assessable income of the partnership under section 207 ‑ 35. X’s share of the distribution is $70 and its share of the franking credit on the distribution is $30. The Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise for X in respect of $42 of the distribution. Under subsection (5), X will be allowed a deduction of $18. X is the trustee of a trust and the distribution will flow indirectly through X to beneficiaries of the trust. For the purposes of working out a beneficiary’s share of the distribution and its share of the franking credit, X’s share of the franked distribution is reduced to $28 under this subsection. What happens if both subsection 207 ‑ 95(1) and subsection (1) of this section would apply (7) If, apart from this subsection, both subsection 207 ‑ 95(1) and subsection (1) of this section would apply to an entity in relation to a * franked distribution, then: (a) subsection (1) of this section applies to the entity; but (b) subsection 207 ‑ 95(1) does not apply to the entity. What happens if both subsection 207 ‑ 95(5) and subsection (5) of this section would apply (8) If, apart from this subsection, both subsection 207 ‑ 95(5) and subsection (5) of this section would apply to an entity in relation to a * franked distribution, then: (a) apply subsections 207 ‑ 95(5) and (6) first; and (b) apply subsections (5) and (6) of this section on the basis that: (i) the amount of the entity’s * share of the * franking credit on the distribution had been reduced under subsection 207 ‑ 95(5); and (ii) the amount of the entity’s * share of the distribution had been reduced under subsection 207 ‑ 95(6).

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 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 68 of 2014, effective Sch 3: 30 June 2014 (s 2(1) item 2) | Amended by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1)

s 207-155 — When is a distribution made as part of a dividend stripping operation?

A distribution made to a * member of a * corporate tax entity is taken to be made as part of a dividend stripping operation if, and only if, the making of the distribution arose out of, or was made in the course of, a * scheme that: (a) was by way of, or in the nature of, dividend stripping; or (b) had substantially the effect of a scheme by way of, or in the nature of, dividend stripping.

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 207-157 — Distribution washing

(1) This section applies to a * franked distribution received by a * member of a * corporate tax entity on a * membership interest (the washed interest ) if: (a) the washed interest was acquired after the member, or a * connected entity of the member, disposed of a substantially identical membership interest; and (b) a corresponding franked distribution is made to the member, or the connected entity, on the substantially identical interest. Further requirement for connected entities (2) However, if the entity that disposed of the substantially identical interest was a * connected entity of the member, this section does not apply to the * franked distribution unless: (a) it would be concluded that the disposal took place wholly or partly because there was an expectation that the acquisition would, or would be likely to, take place; or (b) it would be concluded that the acquisition took place wholly or partly because there was a belief that the disposal had taken place. Substantially identical interests (3) Without limiting paragraph (1)(a), for the purpose of that paragraph a * membership interest is substantially identical to the washed interest if it is any one or more of the following: (a) fungible with, or economically equivalent to, the washed interest; (b) a membership interest in the same * corporate tax entity as the washed interest and of a class that is the same as, or not materially different from, the washed interest; (c) a membership interest in the same corporate tax entity as the washed interest and of a class that is exchangeable at a fixed rate for an interest of the same class as the washed interest; (d) a membership interest in another corporate tax entity that holds predominantly membership interests that are covered by any of the preceding paragraphs; (e) a membership interest in another corporate tax entity that is exchangeable at a fixed rate for interests that are covered by any one or more of paragraphs (a) to (c). Exception for individuals who are small holders (4) Despite subsection (1), this section does not apply to a * franked distribution made to an individual in an income year if the sum of the * tax offsets to which the individual would be entitled, worked out on the basis mentioned in subsection (5), is $5000 or less. (5) Work out the sum of the * tax offsets: (a) disregarding this Subdivision, to the extent it applies to the individual; and (b) not disregarding this Subdivision, to the extent it applies to any other entity through which a * franked distribution * flows indirectly to the individual.

Amendment history: Inserted by No 68 of 2014, effective Sch 3: 30 June 2014 (s 2(1) item 2)

s 207-158 — Distributions entitled to a foreign income tax deduction

(1) This section applies to a * franked distribution if all or part of the distribution gives rise to a * foreign income tax deduction. Exception for distributions made under certain regulatory capital instruments (2) However, this section does not apply to a distribution made in respect of an * equity interest if the interest forms part of Additional Tier 1 capital for the purposes of: (a) applicable * prudential standards; or (b) applicable prudential standards determined by * APRA and in force under section 32 of the Insurance Act 1973 ; or (c) applicable prudential standards determined by APRA and in force under section 230A of the Life Insurance Act 1995 .

Amendment history: Inserted by No 84 of 2018, effective Sch 1 (items 1, 8–13, 15), Sch 2 (items 1–3, 6–10), Sch 3, Sch 4 (items 2–4) and Sch 5: 1 Oct 2018 (s 2(1) item 1) | Repealed and substituted by No 79 of 2020, effective Sch 1, 3 and 5: 1 Oct 2020 (s 2(1) items 2, 4) | Inserted 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 207-159 — Distributions funded by capital raising

(1) This subsection applies to a distribution (the relevant distribution ) of a kind, or a part (the relevant part ) of a distribution (also a relevant distribution ) of a kind, made by an entity if all of the following conditions are satisfied: (a) either: (i) the entity has a practice of making distributions of that kind on a regular basis and the relevant distribution is not made in accordance with that practice; or (ii) the entity does not have a practice of making distributions of that kind on a regular basis; (b) there is an issue of * equity interests in the entity or any other entity (whether before, at or after the time at which the relevant distribution was made); (c) it is reasonable to conclude having regard to all relevant circumstances that: (i) the principal effect of the issue of any of the equity interests was the direct or indirect funding of a substantial part of the relevant distribution or the relevant part; and (ii) any entity that issued, or facilitated the issue of, any of the equity interests did so for a purpose (other than an incidental purpose) of funding a substantial part of the relevant distribution or the relevant part; (d) the issue of the equity interests was not a direct response in order to meet a requirement, direction or recommendation from * APRA or * ASIC. When an entity has a practice of making distributions of a certain kind on a regular basis (2) In considering whether the condition in paragraph (1)(a) is satisfied, take the following matters into account: (a) the nature of distributions made by the entity before the time at which the relevant distribution was made (including the extent to which such distributions were a return on capital); (b) the timing of such distributions; (c) the amount of such distributions; (d) any explanations given by the entity for making such distributions; (e) the amount of the * franking credits on, and the * franking percentages for, such distributions; (f) any other relevant consideration. Distributions funded by issuing equity interests are to be disregarded in determining past practice (3) In considering whether the condition in paragraph (1)(a) is satisfied, disregard a distribution if: (a) the distribution: (i) is a * franked distribution; or (ii) would be a franked distribution if subsection (1) did not apply to it; and (b) subsection (1) would apply to all or any part of the distribution if paragraph (1)(a) were omitted. When issue of equity interests has the effect or purpose of funding all or part of a distribution (4) In considering whether the condition in paragraph (1)(c) is satisfied, take the following matters into account: (a) the extent to which the time (or times) at which any of the * equity interests mentioned in that paragraph were issued differs (or differ) from the time at which the relevant distribution was made; (b) the extent to which the amount of the funds from the issue of any of those equity interests differs from the amount of the relevant distribution or the relevant part (as the case may be); (c) the extent to which the financial position of any of the following entities changed as a result of the relevant distribution (or any part of the relevant distribution) and the issue of any of those equity interests: (i) the entity that made the relevant distribution; (ii) an entity that, before, at or after the time at which the relevant distribution was made, was a * connected entity of that entity; (iii) if the entity in which those equity interests were issued is not the entity that made the relevant distribution—the entity in which those equity interests were issued; (d) the use of the funds from the issue of any of those equity interests; (e) whether there are any reasons for the issue of any of those equity interests other than the funding of the relevant distribution (or any part of the relevant distribution); (f) the extent to which the issue of any of those equity interests was underwritten (whether formally or informally); (g) how the history of the amounts of * franking surplus or * franking deficit for the * franking account of the entity that made the relevant distribution compares to: (i) the history of profits and or loss of that entity; and (ii) the history of the balance of the share capital account of that entity; (h) if the entity that made the relevant distribution is not the entity in which those equity interests were issued—the nature and extent of the relationship between those entities; (i) the extent to which: (i) the entity to which the relevant distribution was made; and (ii) other entities to which analogous distributions were made; (iii) other entities to which analogous distributions were not made, but which were entitled to analogous distributions; are the same as the entities to which those equity interests were issued; (j) other distributions (if any) made by the entity that made the relevant distribution (whether before, at or after the time at which the relevant distribution was made); (k) any other relevant consideration.

s 207-160 — Distribution that is treated as an interest payment

(1) For the purposes of this Subdivision, a * franked distribution is treated as an interest payment for an entity to whom the distribution * flows indirectly if: (a) all or a part of the entity’s individual interest or share amount in relation to the distribution that is mentioned in subsection 207 ‑ 50(2), (3) or (4) could reasonably be regarded as the payment of interest on a loan, having regard to: (i) the way in which that individual interest or share amount was calculated; and (ii) the conditions applying to the payment or application of that individual interest or share amount; and (iii) any other relevant matters; and (b) the entity’s interest in the last intermediary entity (see subsection (2)): (i) was acquired, or was acquired for a period that was extended, at or after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; or (ii) was acquired as part of a * financing arrangement for the entity (including an arrangement extending to an earlier arrangement) that was entered into at or after that time. (2) The entity’s interest in the last intermediary entity is: (a) if the distribution * flows indirectly to the entity as a partner in a partnership under subsection 207 ‑ 50(2)—the entity’s interest in the partnership; or (b) if the distribution flows indirectly to the entity as a beneficiary of a trust under subsection 207 ‑ 50(3)—the entity’s interest in the trust; or (c) if the distribution flows indirectly to the entity as the trustee of a trust under subsection 207 ‑ 50(4)—the entity’s interest in the trust in respect of which the entity is liable to be assessed.

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 208-5 — What is an exempting entity?

(1) An exempting entity is a corporate tax entity that is effectively owned by entities that, either because they are not Australian residents or because they receive distributions as exempt income or non ‑ assessable non ‑ exempt income, would not be able to fully utilise franking credits on distributions by the corporate tax entity. (2) In deciding whether a corporate tax entity is effectively owned by such entities, these rules: (a) look at the membership interests in the entity that involve the holder of the interest in bearing the risks and accruing the opportunities of ownership of the entity; and (b) ask whether at least 95% of those membership interests, and 95% of any interests in those membership interests, are held by Australian residents or entities that receive distributions as exempt income or non ‑ assessable non ‑ exempt income.

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) | 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)

s 208-10 — Former exempting entities

When an entity ceases to be an exempting entity, it becomes a former exempting entity.

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 208-15 — Distributions by exempting entities and former exempting entities

To ensure that franking credits accumulated by an exempting entity are not the target of franking credit trading, these rules: (a) limit the circumstances in which a distribution franked with those credits can give rise to benefits under the imputation system; and (b) quarantine those credits by moving them into a separate account, called the exempting account, when the entity ceases to be an exempting entity; and (c) deny a recipient of a distribution franked with a credit from that account any benefit under the imputation system as a result of that distribution, unless the recipient was a member of the entity immediately before it became a former exempting entity.

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 208-20 — Exempting entities

A * corporate tax entity is an exempting entity at a particular time if, at that time, the entity is effectively owned by prescribed persons. Note: Prescribed persons are identified in sections 208 ‑ 40 and 208 ‑ 45.

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 208-25 — Effective ownership of entity by prescribed persons

(1) An entity is effectively owned by prescribed persons at a particular time if: (a) at that time: (i) not less than 95% of the * accountable membership interests in the entity; or (ii) not less than 95% of the * accountable partial interests in the entity; are held by, or held indirectly for the benefit of, prescribed persons; or (b) paragraph (a) does not apply but it would nevertheless be reasonable to conclude that, at that time, the risks involved in, and the opportunities resulting from, holding accountable membership interests, or accountable partial interests, in the entity that are not held by, or directly or indirectly for the benefit of, prescribed persons are substantially borne by, or substantially accrue to, prescribed persons. (2) In deciding whether it would be reasonable to conclude as mentioned in paragraph (1)(b): (a) have regard to any * arrangement in respect of * membership interests (including unissued membership interests), or in respect of * partial interests, in the entity (including any derivatives held or issued in connection with those membership interests or partial interests) of which the entity is aware; but (b) do not have regard to risks involved in the ownership of membership interests, or partial interests, in the entity that are substantially borne by any person in the person’s capacity as a secured creditor. (3) An entity has a partial interest in a * corporate tax entity if it has an interest in a * membership interest in the corporate tax entity.

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 208-30 — Accountable membership interests

(1) The purpose of this section is to identify which * membership interests in an entity are relevant in determining whether the entity is effectively owned by prescribed persons. (2) A * membership interest in an entity is an accountable membership interest if it is not an excluded membership interest. (3) A * membership interest in an entity is an excluded membership interest if, having regard to: (a) the purposes for which the membership interest was issued; and (b) any special or limited rights connected with, arising from, or attached to: (i) the membership interest; or (ii) other membership interests in the entity held by the holder of the membership interest; or (iii) membership interests in the entity held by persons other than the holder of the membership interest; or (iv) interests in any of the above; including rights that are conferred or exercisable only if the holder of the membership interest or interests concerned is, or is not, a prescribed person; and (c) the extent to which any such special or limited rights are similar to or differ from the rights that are normally attached to the ownership of * ordinary membership interests in * corporate tax entities; and (d) the relationship between the value of the membership interest and the value of the entity; and (e) any relationship or connection (whether of a personal or business nature) between holders of membership interests in the entity of which the entity is aware; and (f) any * arrangement in respect of membership interests (including unissued membership interests) in the entity, or interests in membership interests in the entity, of which the entity is aware; it would be reasonable to conclude that the membership interest is not relevant in determining whether the entity is effectively owned by prescribed persons because holding the membership interest does not involve the holder bearing the risks, or result in the accrual to the holder of the opportunities, of ownership of the entity that ordinarily arise from, or are ordinarily attached to, the holding of ordinary membership interests in an entity. (4) In applying subsection (3), the fact that a person is a trustee is to be disregarded. (5) Without limiting subsection (3), a * membership interest in an entity held by a person who is not a prescribed person is an excluded membership interest if: (a) it is a finance membership interest; or (b) it is a distribution access membership interest; or (c) it does not carry the right to receive distributions; or (d) it was issued, transferred or acquired for a purpose (other than an incidental purpose) of ensuring that the entity is not effectively owned by prescribed persons. (6) A * membership interest is a finance membership interest if: (a) the membership interest is a * non ‑ equity share in the entity; or (b) having regard to the rights attached to the membership interest and to any * arrangement with respect to the membership interest of which the entity is aware, the membership interest is equivalent to a debt owed by the entity to the holder of the membership interest. (7) A * membership interest to which subsection (6) does not apply is a finance membership interest if: (a) the manner in which the * distributions payable in respect of the membership interest are calculated, and the conditions applying to the payment of such distributions, indicate that the distributions paid are equivalent to the receipt by the person to whom they are paid of interest or an amount in the nature of or similar to interest; or (b) the capital invested by the holder of the membership interest will be redeemed or, because of an * arrangement between the holder and the entity or an * associate of the entity, it is reasonable for the holder to expect that the capital will be redeemed, for an amount that is not less than, or for property (including other membership interests in the entity) the value of which is not less than, the amount paid for the membership interest; or (c) the membership interest is redeemable by the entity by payment of a lump sum or by the transfer of property, or the membership interest has a preferred right to a repayment of capital on a winding up, where the amount of the lump sum or the value of the property, or the amount of the capital to be repaid, as the case may be, is to be calculated by reference to an implicit interest rate. (8) A * membership interest in an entity is a distribution access membership interest if, having regard to: (a) the terms of the issue of the membership interest, including any guarantee of payment of distributions; and (b) the amounts of the * distributions paid on the membership interest relative to the issue price of the membership interest; and (c) whether there is any guaranteed rate at which * franked distributions are to be paid on the membership interest; and (d) the duration of the period within which the membership interest was issued; and (e) the rights attached to other membership interests in the entity; and (f) any other relevant matters; it could be concluded that the membership interest was issued only for the purpose of paying distributions to the holder of the membership interest.

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 208-35 — Accountable partial interests

(1) The purpose of this section is to identify which * partial interests in an entity are relevant in determining whether the entity is effectively owned by prescribed persons. (2) A * partial interest in an entity is an accountable partial interest if it is not an excluded partial interest. (3) A * partial interest in an entity is an excluded partial interest if, having regard to: (a) the purposes for which the interest was granted; and (b) the nature of the interest; and (c) any special or limited rights connected with or arising from: (i) the interest; or (ii) other * membership interests, or partial interests, in the entity held by the holder of the interest; or (iii) membership interests, or partial interests, in the entity held by persons other than the holder of the interest; including rights that are conferred or exercisable only if the holder of the membership interests or partial interests concerned is, or is not, a prescribed person; and (d) the extent to which the interest is similar to or differs from beneficial ownership; and (e) the relationship between the value of the interest and the value of the entity; and (f) any relationship or connection (whether of a personal or business nature) between holders of partial interests in the entity, and the holders of membership interests in the entity, of which the entity is aware; and (g) any * arrangement in respect of membership interests (including unissued membership interests) in the entity, or partial interests in the entity, of which the entity is aware; it would be reasonable to conclude that the partial interest is not relevant in determining whether the entity is effectively owned by prescribed persons because holding the membership interest to which the partial interest relates does not involve the holder bearing the risks, or result in the accrual to the holder of the opportunities, of ownership of the entity that ordinarily arise from, or are ordinarily attached to, the holding of * ordinary membership interests in an entity. (4) In applying subsection (3), the fact that a person is a trustee is to be disregarded. (5) Without limiting subsection (3), a * partial interest in an entity is also an excluded partial interest if it was granted or otherwise created, or was transferred or acquired, for a purpose (other than an incidental purpose) of ensuring that the entity is not effectively owned by prescribed persons.

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 208-40 — Prescribed persons

(1) A company is a prescribed person in relation to another * corporate tax entity if: (a) the company is a foreign resident; or (b) were the company to receive a * distribution made by the other corporate tax entity, the distribution would be * exempt income or * non ‑ assessable non ‑ exempt income of the company. (2) A trustee is a prescribed person in relation to a * corporate tax entity if: (a) all the beneficiaries in the trust are prescribed persons under other provisions of this section; or (b) were the trustee to receive a * distribution made by the corporate tax entity, the distribution would be * exempt income or * non ‑ assessable non ‑ exempt income of the trust estate. (3) A partnership is a prescribed person in relation to a * corporate tax entity if: (a) all the partners are prescribed persons under other provisions of this section; or (b) were the partnership to receive a * distribution made by the corporate tax entity, the distribution would be * exempt income or * non ‑ assessable non ‑ exempt income of the partnership. (4) An individual (other than a trustee) is a prescribed person in relation to a * corporate tax entity if: (a) he or she is a foreign resident; or (b) were he or she to receive a * distribution made by the corporate tax entity, the distribution would be * exempt income or * non ‑ assessable non ‑ exempt income of the individual. (5) The Commonwealth, each of the States, the Australian Capital Territory, the Northern Territory and Norfolk Island are prescribed persons in relation to any * corporate tax entity. (6) An * exempt institution that is eligible for a refund cannot be a prescribed person in relation to a * corporate tax entity under this section.

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) | 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 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)

s 208-45 — Persons who are taken to be prescribed persons

(1) This section applies to a person that: (a) is a company, a trustee, or a partnership, that holds * membership interests (whether * accountable membership interests or excluded membership interests), or * partial interests (whether * accountable partial interests or excluded partial interests), in a * corporate tax entity (the relevant entity ); and (b) is not a prescribed person under section 208 ‑ 40. (2) A company that holds * membership interests, or * partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if the risks involved in, and the opportunities resulting from, holding the membership interests or partial interests are substantially borne by, or substantially accrue to, as the case may be, one or more prescribed persons. (3) A trustee of a trust who holds * membership interests, or * partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if the risks involved in, and the opportunities resulting from, holding the membership interests or partial interests are substantially borne by, or substantially accrue to, as the case may be, one or more prescribed persons. (4) A trustee of a trust who holds * membership interests, or * partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if: (a) unless subsection (7) applies, the trust is controlled by one or more persons who are prescribed persons; or (b) all the beneficiaries who are presently entitled to, or during the relevant income year become presently entitled to, income from the trust are prescribed persons. (5) In determining whether subsection (3) or (4) applies in respect of a trust that is controlled by a person, have regard to the way in which the person, or any * associate of the person, exercises powers in relation to the trust. (6) A person controls a trust if: (a) the person has the power, either directly, or indirectly through one or more interposed entities, to control the application of the income, or the distribution of the property, of the trust; or (b) the person has the power, either directly, or indirectly through one or more entities, to appoint or remove the trustee of the trust; or (c) the person has the power, either directly, or indirectly through one or more entities, to appoint or remove beneficiaries of the trust; or (d) the trustee of the trust is accustomed or under an obligation, whether formal or informal, to act according to the directions, instructions or wishes of the person or of an * associate of the person. (7) Paragraph (4)(a) does not apply in relation to a trust if some of the beneficiaries receiving income from the trust are not prescribed persons and the Commissioner considers that it is reasonable to conclude that the risks involved in, and the opportunities resulting from, holding the * membership interests or * partial interests in the relevant entity are substantially borne by, or substantially accrue to, as the case may be, one or more persons who are not prescribed persons. (8) A partnership that holds * membership interests, or * partial interests, in the relevant entity is taken to be a prescribed person in relation to the relevant entity if the risks involved in, and the opportunities resulting from, holding the membership interests or partial interests are substantially borne by, or substantially accrue to, as the case may be, one or more prescribed persons. (9) If any of the prescribed persons referred to in subsection (2), (3), (4) or (8) is a * corporate tax entity, that subsection applies even if the risks involved in, and the opportunities resulting from, holding any of the * membership interests, or * partial interests, in that entity are substantially borne by, or substantially accrue to, as the case may be, one or more persons who are not prescribed persons. (10) An * exempt institution that is eligible for a refund cannot be taken to be a prescribed person in relation to a * corporate tax entity under this section.

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) | 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 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 208-50 — Former exempting companies

(1) Subject to subsection (2), a * corporate tax entity is a former exempting entity if it has, at any time, ceased to be an * exempting entity and is not again an exempting entity. (2) If an entity that, at any time, becomes effectively owned by prescribed persons ceases to be so effectively owned within 12 months after that time, the entity is not taken, by so ceasing, to become a former exempting entity.

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 208-55 — What this Subdivision is about

If a former exempting entity makes a distribution in circumstances where it could be franked, the entity can frank the distribution with an exempting credit. Table of sections Operative provisions 208 ‑ 60 Franking with an exempting credit

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 208-60 — Franking with an exempting credit

An entity franks a * distribution with an exempting credit if: (a) the entity is a * former exempting entity when the distribution is made; and (b) the entity is a * franking entity that satisfies the * residency requirement when the distribution is made; and (c) the distribution is a * frankable distribution; and (d) the entity allocates an * exempting credit to the distribution. Note: The residency requirement for an entity making a distribution is set out in section 202 ‑ 20.

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 208-65 — What this Subdivision is about

The amount of the exempting 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, it is nil. Table of sections Operative provisions 208 ‑ 70 Amount of the exempting credit on a distribution

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 208-70 — Amount of the exempting credit on a distribution

(1) Subject to subsection (2), the amount of the * exempting credit on a * distribution is that stated in the * distribution statement for the distribution. (2) If the sum of the * franking credit and the * exempting credit stated in the * distribution statement for a * distribution exceeds the * maximum franking credit for the distribution, the amount of the exempting credit on the distribution is taken to be nil. Note: If the franking credit stated in the distribution statement exceeds the maximum franking credit for the distribution, the amount of the franking credit on the distribution is taken to equal that maximum under section 202 ‑ 65.

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 208-75 — Guide to Subdivision 208 ‑ D

Former exempting entities and exempting entities that make certain distributions must provide additional information in the distribution statement given to the recipient. Table of sections Operative provisions 208 ‑ 80 Additional information to be included by a former exempting entity or exempting entity

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 208-80 — Additional information to be included by a former exempting entity or exempting entity

(1) A * former exempting entity that makes a * distribution * franked with an exempting credit must include in the * distribution statement given to the recipient, a statement that there is an * exempting credit of a specified amount on the distribution. (2) An * exempting entity that makes a * frankable distribution to a * member must include in the * distribution statement given to the member, a statement to the effect that members who are Australian residents are not entitled to a * tax offset or * franking credit as a result of the distribution, except for certain * corporate tax entities, and employees who receive the distribution in connection with certain * employee share schemes. (3) If, under subsection (1) or (2), a statement must be included in a * distribution statement, the distribution statement is taken not to have been given unless the statement is included.

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) | 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 208-85 — What this Subdivision is about

All frankable distributions made within a franking period must be franked to the same extent with an exempting credit. Table of sections Operative provisions 208 ‑ 90 All frankable distributions made within a franking period must be franked to the same extent with an exempting credit 208 ‑ 95 Exempting percentage 208 ‑ 100 Consequences of breaching the rule in section 208 ‑ 90

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 208-90 — All frankable distributions made within a franking period must be franked to the same extent with an exempting credit

(1) If an entity * franks a * distribution with an exempting credit, it must frank each other * frankable distribution made within the same * franking period with an exempting credit worked out at the same * exempting percentage. (2) If an entity is not a * former exempting entity for the whole of a * franking period (the longer period ), then, for the purposes of subsection (1), each period within that longer period during which the entity is a former exempting entity is taken to be a franking period .

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 208-95 — Exempting percentage

The exempting percentage for a * frankable distribution is worked out using the formula:

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 208-100 — Consequences of breaching the rule in section 208 ‑ 90

If an entity * franks a * distribution with an exempting credit in breach of section 208 ‑ 90: (a) that distribution is taken not to have been franked with an exempting credit; and (b) each other * frankable distribution made by the entity within the relevant * franking period is taken not to have been franked with an exempting credit.

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 208-105 — What this Subdivision is about

This Subdivision: • creates an exempting account for each former exempting entity; and • identifies when exempting credits and debits arise in those accounts and the amount of those credits and debits; and • identifies when there is an exempting surplus or deficit in the account; and • identifies when franking credits and debits arise in the franking account of an entity because it is an exempting entity, or former exempting entity. Table of sections Operative provisions 208 ‑ 110 Exempting account 208 ‑ 115 Exempting credits 208 ‑ 120 Exempting debits 208 ‑ 125 Exempting surplus and deficit 208 ‑ 130 Franking credits arising because of status as exempting entity or former exempting entity 208 ‑ 135 Relationships that will give rise to a franking credit under item 5 of the table in section 208 ‑ 130 208 ‑ 140 Membership of the same effectively wholly ‑ owned group 208 ‑ 145 Franking debits arising because of status as exempting entity or former exempting entity 208 ‑ 150 Residency requirement 208 ‑ 155 Eligible continuing substantial member 208 ‑ 160 Distributions that are affected by a manipulation of the imputation system 208 ‑ 165 Amount of the exempting credit or franking credit arising because of a distribution franked with an exempting credit 208 ‑ 170 Where a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 affects part of the distribution 208 ‑ 175 When does a distribution franked with an exempting credit flow indirectly to an entity? 208 ‑ 180 What is an entity’s share of the exempting credit on a distribution? 208 ‑ 185 Minister may convert exempting surplus to franking credit of former exempting entity previously owned by the Commonwealth

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 208-110 — Exempting account

Each * former exempting entity has an exempting account .

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 208-115 — Exempting credits

(1) The following table sets out when a credit arises in the * exempting account of a * former exempting entity. A credit in the former exempting entity’s account is called an exempting credit . Exempting Credits Item If: A credit of: Arises: 1 the entity had a * franking surplus at the time it became a * former exempting entity (at the time of its transition ) an amount equal to: (a) in a case not covered by paragraph (b)—the franking surplus; or (b) if the entity has been a former exempting entity at any time within a period of 12 months before its transition—so much of the franking surplus as would have been the entity’s * exempting surplus had it remained a former exempting entity throughout the period immediately after its transition 2 the entity receives a * distribution * franked with an exempting credit; and the entity satisfies the * residency requirement for the income year in which the distribution is made and at the time the distribution is made; and some part of the distribution is neither * exempt income nor * non ‑ assessable non ‑ exempt income of the entity; and the entity is an * eligible continuing substantial member in relation to the distribution; and the distribution is not affected by a manipulation of the imputation system mentioned in section 208 ‑ 160 an amount worked out under subsection 208 ‑ 165(1) on the day on which the distribution is made 3 the entity receives a * distribution * franked with an exempting credit; and the entity satisfies the * residency requirement for the income year in which the distribution is made and at the time the distribution is made; and some part of the distribution is neither * exempt income nor * non ‑ assessable non ‑ exempt income of the entity; and the entity is an * eligible continuing substantial member in relation to the distribution; and the Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no franking credit benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution an amount worked out under subsection 208 ‑ 170(1) on the day on which the distribution is made 4 a * distribution * franked with an exempting credit * flows indirectly to the entity (the ultimate recipient ); and the recipient of the distribution is an * eligible continuing substantial member in relation to the distribution; and except for the fact that the ultimate recipient is not an eligible continuing substantial member in relation to the distribution, it would have been entitled to an * exempting credit because of the distribution had the distribution been made to the ultimate recipient an amount equal to the exempting credit that would have arisen for the ultimate recipient if: (a) the ultimate recipient had been an eligible continuing substantial member in relation to the distribution; and (b) the distribution had been made to the ultimate recipient; and (c) the distribution had been franked with an exempting credit equal to the ultimate recipient’s * share of the actual exempting credit on the day on which the distribution is made 5 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 was an * exempting entity for the whole or part of the relevant * PAYG instalment period an amount equal to that part of the payment that is attributable to the period during which the entity was an exempting entity on the day on which the payment is made 6 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 was an * exempting entity for the whole or part of that income year an amount equal to that part of the payment that is attributable to the period during which the entity was an exempting entity on the day on which the payment is made 7 the * exempting account of the entity would, apart from this item, be in * deficit immediately before the end of an income year an amount equal to the deficit immediately before the end of the income year 8 the entity becomes an * exempting entity; and the entity has an * exempting deficit at the time it becomes an exempting entity an amount equal to the exempting deficit immediately after the entity becomes an exempting entity 9 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 was an * exempting entity for the whole or part of that income year an amount equal to that part of the payment that is attributable to the period during which the entity was an exempting entity, multiplied by the proportion worked out under subsection (2) on the day on which the payment is made (2) 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 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 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 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | 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)

s 208-120 — Exempting debits

(1) The following table sets out when a debit arises in the * exempting account of the * former exempting entity. A debit in the * former exempting entity's exempting account is called an exempting debit . Exempting debits Item If: A debit of: Arises: 1 the entity had a * franking deficit at the time it became a * former exempting entity (at the time of its transition ) an amount equal to: (a) in a case not covered by paragraph (b)—the franking deficit; or (b) if the entity has been a former exempting entity at any time within a period of 12 months before its transition—so much of the franking deficit as would have been the entity’s * exempting deficit had it remained a former exempting entity throughout the period immediately after its transition 2 the entity makes a * distribution * franked with an exempting credit an amount equal to the * exempting credit on the distribution on the day on which the distribution is made 3 the entity * receives a refund of income tax; and the entity was an * exempting entity during all or part of the income year to which the refund relates; and the entity satisfies the * residency requirement for the income year to which the refund relates an amount equal to that part of the refund that is attributable to the period during which the entity is an exempting entity on the day on which the refund is received 4 the Commissioner makes a determination under paragraph 204 ‑ 30(3)(b) giving rise to an * exempting debit for the entity (streaming distributions) the amount specified in the determination on the day specified in section 204 ‑ 35 5 a * franking debit arises for the entity under section 204 ‑ 15 (linked distributions), 204 ‑ 25 (substituting tax ‑ exempt bonus shares for franked distributions) or a determination made under paragraph 204 ‑ 30(3)(a) (streaming distributions); and the entity was an * exempting entity for the whole or part of the period to which the franking debit relates an amount equal to that part of the franking debit that relates to the period during which the entity was an exempting entity when the franking debit arises 6 the Minister makes a determination under paragraph 208 ‑ 185(4)(a) giving rise to an * exempting debit for the entity the amount specified in the determination on the day specified in the determination 7 the entity becomes an * exempting entity; and the entity has an * exempting surplus at the time it becomes an exempting entity an amount equal to the exempting surplus immediately after the entity becomes an exempting entity 8 the entity * receives a refund of diverted profits tax; and the entity was an * exempting entity during all or part of the income year to which the refund relates; and the entity satisfies the * residency requirement for the income year to which the refund relates an amount equal to that part of the refund that is attributable to the period during which the entity is an exempting entity, multiplied by the proportion worked out under subsection (2) on the day on which the refund is received (2) 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 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 27 of 2017, effective Sch 1 (items 14–43, 52) and Sch 3: 1 July 2017 (s 2(1) items 4, 5)

s 208-125 — Exempting surplus and deficit

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

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 208-130 — Franking credits arising because of status as exempting entity or former exempting entity

The following table sets out when a credit arises in the * franking account of an entity because of its status as an * exempting entity or * former exempting entity. Franking credits arising because of status as an exempting entity or former exempting entity Item If: A credit of: Arises: 1 an entity becomes a * former exempting entity; and the entity has a * franking deficit at the time it becomes a former exempting entity an amount equal to the franking deficit immediately after the entity becomes a former exempting entity 2 an entity receives a * distribution * franked with an exempting credit; and the entity is an * exempting entity at the time the distribution is made; and the entity satisfies the * residency requirement for the income year in which the distribution is made and at the time the distribution is made; and some part of the distribution is neither * exempt income nor * non ‑ assessable non ‑ exempt income of the entity; and an amount worked out under subsection 208 ‑ 165(1) on the day on which the distribution is made the entity is an * eligible continuing substantial member in relation to the distribution; and the distribution is not affected by a manipulation of the imputation system mentioned in section 208 ‑ 160 3 the entity receives a * distribution * franked with an exempting credit; and the entity is an * exempting entity at the time the distribution is made; and the entity satisfies the * residency requirement for the income year in which the distribution is made and at the time the distribution is made; and some part of the distribution is neither * exempt income nor * non ‑ assessable non ‑ exempt income of the entity; and the entity is an * eligible continuing substantial member in relation to the distribution; and the Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no franking credit benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution an amount worked out under subsection 208 ‑ 170(1) on the day on which the distribution is made 4 a * distribution * franked with an exempting credit * flows indirectly to the entity (the ultimate recipient ); and the recipient of the distribution is an * eligible continuing substantial member in relation to the distribution; and except for the fact that the ultimate recipient is not an eligible continuing substantial member in relation to the distribution, it would have been entitled to a * franking credit because of the distribution had the distribution been made to the ultimate recipient an amount equal to the franking credit that would have arisen for the ultimate recipient if: (a) the ultimate recipient had been an eligible continuing substantial member in relation to the distribution; and (b) the distribution had been made to the ultimate recipient; and (c) the distribution had been franked with a franking credit equal to the ultimate recipient’s * share of the actual franking credit on the day on which the distribution is made 5 an * exempting entity makes a * franked distribution to the entity (the recipient ); and at the time the distribution is made: (a) the recipient is an exempting entity; and (b) the recipient satisfies the * residency requirement; and (c) the relationship between the entities is of the type mentioned in section 208 ‑ 135; and an amount worked out using the formula in subsection 208 ‑ 165(2) on the day on which the distribution is made the recipient satisfies the residency requirement for the income year in which the distribution is made; and some part of the distribution is neither * exempt income nor * non ‑ assessable non ‑ exempt income of the recipient; and the distribution is not affected by a manipulation of the imputation system mentioned in section 208 ‑ 160 6 an * exempting entity makes a * franked distribution to the entity (the recipient ); and at the time the distribution is made: (a) the recipient is an exempting entity; and (b) the recipient satisfies the * residency requirement; and (c) the relationship between the entities is of the type mentioned in section 208 ‑ 135; and the recipient satisfies the residency requirement for the income year in which the distribution is made; and some part of the distribution is neither * exempt income nor * non ‑ assessable non ‑ exempt income of the recipient; and the Commissioner has made a an amount worked out using the formula in subsection 208 ‑ 170(2) on the day on which the distribution is made determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no franking credit benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution 7 a * distribution made by an * exempting entity * flows indirectly to the entity (the ultimate recipient ); and the recipient of the distribution is an * eligible continuing substantial member in relation to the distribution; and except for the fact that the ultimate recipient is not an eligible continuing substantial member in relation to the distribution, it would have been entitled to a * franking credit because of the distribution had the distribution been made to the ultimate recipient an amount equal to the franking credit that would have arisen for the ultimate recipient if: (a) the ultimate recipient had been an eligible continuing substantial member in relation to the distribution; and (b) the distribution had been made to the ultimate recipient; and (c) the distribution had been franked with a franking credit equal to the ultimate recipient’s * share of the actual franking credit on the day on which the distribution is made 8 the Minister makes a determination under paragraph 208 ‑ 185(4)(b) giving rise to a * franking credit for the entity the amount of the credit specified in the determination on the day specified in the determination 9 an * exempting debit arises for the entity under item 3, 5 or 8 of the table in section 208 ‑ 120 an amount equal to the exempting debit when the exempting debit arises 10 a * former exempting entity becomes an * exempting entity; and the entity has an * exempting surplus at the time it becomes an * exempting entity an amount equal to the * exempting surplus immediately after it becomes an exempting entity Note: Item 9 is designed to reverse out franking debits that arise in relation to a period during which the entity is an exempting entity. The entity will receive an exempting debit instead.

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) | 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 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | 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)

s 208-135 — Relationships that will give rise to a franking credit under item 5 of the table in section 208 ‑ 130

(1) A relationship between an entity making a * franked distribution and the recipient of the distribution is of a type that gives rise to a * franking credit under item 5 or 6 of the table in section 208 ‑ 130 if either: (a) both entities are members of the same effectively wholly ‑ owned group; or (b) the recipient holds more than 5% of the * membership interests in the entity making the distribution (other than finance membership interests or distribution access membership interests within the meaning of section 208 ‑ 30 or membership interests that do not carry the right to receive distributions) and it would be reasonable to conclude that the risks involved in, and the opportunities resulting from, holding those membership interests are substantially borne by, or substantially accrue to, the recipient. (2) In deciding whether it would be reasonable to make the conclusion mentioned in paragraph (1)(b): (a) have regard to any * arrangement in respect of the * membership interests (including unissued membership interests) in the entity making the distribution (including derivatives held or issued in connection with those membership interests); and (b) do not have regard to risks involved in the ownership of membership interests in the entity making the distribution that are substantially borne by any person in the person’s capacity as a secured creditor.

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 208-140 — Membership of the same effectively wholly ‑ owned group

(1) Two * corporate tax entities are members of the same effectively wholly ‑ owned group of entities on a particular day if: (a) throughout that day, not less than 95% of the * accountable membership interests in each of the entities, and not less than 95% of the * accountable partial interests in each of the entities, are held by, or are held indirectly for the benefit of, the same persons; or (b) paragraph (a) does not apply but it would nevertheless be reasonable to conclude, having regard to the matters mentioned in subsection (2), that, throughout that day, the risks involved in, and the opportunities resulting from, holding accountable membership interests, or accountable partial interests, in each of the entities are substantially borne by, or substantially accrue to, the same persons. (2) The matters to which regard is to be had as mentioned in paragraph (1)(b) are: (a) any special or limited rights attaching to * accountable membership interests, or * accountable partial interests, in each of the entities held by persons other than the persons mentioned in paragraph (1)(b) or their * associates; and (b) any special rights attaching only to accountable membership interests, or accountable partial interests, in each of the entities held by the persons mentioned in paragraph (1)(b) or their associates; and (c) the respective proportions: (i) that accountable membership interests in each of the entities held by the persons mentioned in paragraph (1)(b) or their associates, and other accountable membership interests in the entity concerned, bear to all the accountable membership interests in that entity; and (ii) that accountable partial interests in each of the entities held by the persons mentioned in paragraph (1)(b) or their associates, and other accountable partial interests in the entity concerned, bear to all the accountable partial interests in that entity; and (d) the respective proportions that: (i) the total value of accountable membership interests in each of the entities held by the persons mentioned in paragraph (1)(b) or their associates, and the total value of other accountable membership interests in the entity concerned, bear to the total value of all the accountable membership interests in that entity; and (ii) the total value of accountable partial interests in each of the entities held by the persons mentioned in paragraph (1)(b) or their associates, and the total value of other accountable partial interests in the entity concerned, bear to the total value of all the accountable partial interests in that entity; and (e) the purposes for which accountable membership interests, or accountable partial interests, in each of the entities were issued or granted to persons other than the persons mentioned in paragraph (1)(b) or their associates; and (f) any * arrangement in respect of accountable membership interests, or accountable partial interests, in each of the entities held by persons other than the persons mentioned in paragraph (1)(b) or their associates (including any derivatives held or issued in connection with those membership interests or interests) of which the entity concerned is aware.

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 208-145 — Franking debits arising because of status as exempting entity or former exempting entity

The following table sets out when a debit arises in the * franking account of an entity because of its status as an * exempting entity or * former exempting entity. Franking debits arising because of status as an exempting entity or former exempting entity Item If: A debit of: Arises: 1 an entity becomes a * former exempting entity; and the entity has a * franking surplus at the time it becomes a former exempting entity the amount of the franking surplus immediately after the entity becomes a former exempting entity 2 the * exempting account of a * former exempting entity would, apart from item 7 of the table in section 208 ‑ 115, be in * deficit immediately before the end of an income year an amount equal to the deficit immediately before the end of the income year 3 an * exempting credit arises in the * exempting account of the entity under item 5, 6 or 9 of the table in section 208 ‑ 115 an amount equal to the exempting credit when the exempting credit arises 4 a * former exempting entity becomes an * exempting entity; and the entity has an * exempting deficit at the time it becomes an * exempting entity an amount equal to the exempting deficit immediately after it becomes an exempting entity 5 a * franking credit arises in the * franking account of an entity under item 3 or 4 of the table in section 205 ‑ 15 because a * distribution is made by an * exempting entity to the entity, or a distribution made by an exempting entity * flows indirectly to the entity an amount equal to the amount of the franking credit when the franking credit arises Note 1: Item 3 of the table is designed to reverse out franking credits that arise in relation to a period during which the entity is an exempting entity. The entity will receive an exempting credit instead. Note 2: Item 5 of the table is designed to reverse out franking credits that arise under the core rules because an entity receives a franked distribution from an exempting entity. Only a recipient who is itself an exempting entity is entitled to a franking credit in these circumstances.

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) | 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 27 of 2017, effective Sch 1 (items 14–43, 52) and Sch 3: 1 July 2017 (s 2(1) items 4, 5)

s 208-150 — Residency requirement

The tables in sections 208 ‑ 115, 208 ‑ 120, 208 ‑ 130 and 208 ‑ 145 are relevant for the purposes of subsection 205 ‑ 25(1). Note 1: Subsection 205 ‑ 25(1) sets out the residency requirement for an income year in which, or in relation to which, an event specified in one of the tables occurs. Note 2: Section 207 ‑ 75 sets out the residency requirement that must be satisfied by the entity receiving a distribution when the distribution is made.

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 208-155 — Eligible continuing substantial member

(1) A * member of a * former exempting entity is an eligible continuing substantial member in relation to a * distribution made by the entity if the following provisions apply. (2) At both the time when the * distribution was made, and the time immediately before the entity ceased to be an * exempting entity, the * member was entitled to not less than 5% of: (a) where the entity is a company: (i) if the voting shares (as defined in the Corporations Act 2001 ) in the relevant former exempting entity are not divided into classes—those voting shares; or (ii) if the voting shares (as so defined) in the relevant former exempting entity are divided into 2 or more classes—the shares in one of those classes; and (b) where the entity is a * public trading trust—the units in the trust; and (c) where the entity is a * corporate limited partnership—the income of the partnership. (3) At both the time when the * distribution was made, and the time immediately before the entity ceased to be an * exempting entity, the * member was a person referred to in one or more of the following paragraphs: (a) a person who is a foreign resident; (b) a * life insurance company; (c) an exempting entity; (d) a * former exempting entity; (e) a trustee of a trust in which an interest was held by a person referred to in any of paragraphs (a) to (d); (f) a partnership in which an interest was held by a person referred to in any of paragraphs (a) to (d). (4) If the assumptions set out in subsection (5) are made: (a) if the * member was a person referred to in any of paragraphs (3)(a) to (d)—the member; or (b) if the member was a trustee of a trust or a partnership, being a trust or partnership in which a person referred to in any of those paragraphs held an interest—the holder of the interest; would (if a foreign resident) be exempt from * withholding tax on the distribution or (if an Australian resident) be entitled to a * franking credit or a * tax offset in respect of the distribution. (5) The assumptions referred to in subsection (4) are that: (a) the relevant former exempting entity was an * exempting entity at the time it made the * distribution; and (b) the distribution was a * franked distribution made to the member; and (c) if the * member was a * former exempting entity—the member was an exempting entity; and (d) if the member was a trustee of a trust or partnership in which a former exempting entity had an interest—the former exempting entity was an exempting entity. (6) A person is taken to hold an interest in a trust, for the purposes of paragraph (3)(e), if: (a) the person is a beneficiary under the trust; or (b) the person * derives, or will derive, income indirectly, through interposed trusts or partnerships, from * distributions received by the trustee. (7) A person is taken to hold an interest in a partnership, for the purposes of paragraph (3)(f), if: (a) the person is a partner in the partnership; or (b) the person * derives, or will derive, income indirectly, through interposed trusts or partnerships, from * distributions received by the partnership.

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) | 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 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 208-160 — Distributions that are affected by a manipulation of the imputation system

For the purposes of item 2 of the table in section 208 ‑ 115 and items 2 and 5 of the table in section 208 ‑ 130, a * distribution to an entity is affected by a manipulation of the imputation system if: (a) the Commissioner has made a determination under paragraph 204 ‑ 30(3)(c) that no * imputation benefit is to arise for the entity in respect of the distribution; or (b) the Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no franking credit benefit (within the meaning of that section) is to arise in respect of the distribution to the entity; or (c) the distribution is part of a * dividend stripping operation.

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 208-165 — Amount of the exempting credit or franking credit arising because of a distribution franked with an exempting credit

(1) Use the following formula to work out: (a) the amount of an * exempting credit arising under item 2 of the table in section 208 ‑ 115 because a * former exempting entity receives a * distribution * franked with an exempting credit; or (b) the amount of a * franking credit arising under item 2 of the table in section 208 ‑ 130 because an * exempting entity receives a distribution franked with an exempting credit; (2) Use the following formula to work out the amount of a * franking credit arising under item 5 of the table in section 208 ‑ 130 because an * exempting entity receives a * distribution * franked with an exempting credit:

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) | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 208-170 — Where a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 affects part of the distribution

(1) Use the following formula to work out: (a) the amount of an * exempting credit arising under item 3 of the table in section 208 ‑ 115 because a * former exempting entity receives a * distribution * franked with an exempting credit; or (b) the amount of a * franking credit arising under item 3 of the table in section 208 ‑ 130 because an * exempting entity receives a distribution franked with an exempting credit; (2) Use the following formula to work out the amount of a * franking credit arising under item 6 of the table in section 208 ‑ 130 because an * exempting entity receives * a distribution * franked with an exempting credit:

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) | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 208-175 — When does a distribution franked with an exempting credit flow indirectly to an entity?

A * distribution * franked with an exempting credit is taken to flow indirectly to an entity if, had it been a * franked distribution, it would have been taken to have flowed indirectly to the entity under section 207 ‑ 50.

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) | 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 208-180 — What is an entity’s share of the exempting credit on a distribution?

To work out an entity’s share of the * exempting credit on a * distribution * franked with that credit, use sections 207 ‑ 55 and 207 ‑ 57 to work out what the entity’s share of the credit would be it if were a * franking credit on a * franked distribution. The entity’s share of the exempting credit is equal to that amount.

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) | 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 208-185 — Minister may convert exempting surplus to franking credit of former exempting entity previously owned by the Commonwealth

(1) The Minister may make a determination or determinations under this section if: (a) at a particular time, a * corporate tax entity is an * exempting entity; and (b) at that time all of the * membership interests in the entity are owned by the Commonwealth; and (c) the Commonwealth has offered for sale or sold, or proposes to offer for sale, some or all of the membership interests; and (d) the Minister is satisfied, having regard to the matters mentioned in subsection (2), that it is desirable to make a determination or determinations under this section in relation to the entity. (2) The matters to which the Minister must have regard under paragraph (1)(d) are: (a) whether the making of the determination or determinations is necessary to enable the entity to make * distributions * franked at a * franking percentage of 100% after the sale; and (b) the extent to which the success of the sale or proposed sale depended or will depend upon the ability of the entity to make * franked distributions; and (c) the extent to which the reduction in receipts of income tax resulting from the making of the determination or determinations would be offset by the receipt of increased proceeds from the sale; and (d) any other matters that the Minister thinks relevant. (3) The following provisions of this section apply after the * exempting entity becomes a * former exempting entity. (4) If the * former exempting entity would, apart from this section, have an * exempting surplus at the end of an income year, the Minister may, in writing, determine that: (a) an * exempting debit of the entity (not exceeding the exempting surplus) specified in the determination is taken to have arisen immediately before the end of that income year; and (b) a * franking credit of the entity equal to the amount of the exempting debit is taken to have arisen immediately before the end of that income year. (5) A determination under this section may be expressed to be subject to compliance by the * former exempting entity with such conditions as are specified in the determination. (6) If a condition specified in a determination is not complied with, the Minister may revoke the determination and, if the Minister thinks it appropriate, make a further determination under subsection (4). (7) A determination, unless it is revoked, has effect according to its terms.

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 208-190 — What this Subdivision is about

Generally, a franked distribution from an exempting entity will only generate a tax effect for the recipient under Division 207 if the recipient is also an exempting entity. A concession is made to employees of the entity who receive a franked distribution because they hold shares acquired under an eligible employee share scheme. Table of sections Operative provisions 208 ‑ 195 Division 207 does not generally apply 208 ‑ 200 Distributions to exempting entities 208 ‑ 205 Distributions to employees acquiring shares under eligible employee share schemes 208 ‑ 215 Eligible employee share schemes

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) | Amended by No 133 of 2009, effective Schedule 1 (items 1, 21–76, 86, 87): 14 Dec 2009 Schedule 2 (items 1–13, 15) and Schedule 3 (items 28–40, 44, 45): Royal Assent

s 208-195 — Division 207 does not generally apply

Division 207 does not apply to a * distribution by an * exempting entity, unless expressly applied under this Subdivision.

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 208-200 — Distributions to exempting entities

(1) Division 207 applies to a * franked distribution made by an * exempting entity to another exempting entity if the distribution gives rise to a * franking credit for the other exempting entity under item 5 or 6 of the table in section 208 ‑ 130. (2) Division 207 applies to a * franked distribution that is made by an * exempting entity and * flows indirectly to another exempting entity if the distribution gives rise to a * franking credit for that other entity under item 7 of the table in section 208 ‑ 130.

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 208-205 — Distributions to employees acquiring shares under eligible employee share schemes

Division 207 also applies to a * franked distribution made by an * exempting entity if: (a) the distribution is made to an individual who, at the time the distribution is made, is an employee of: (i) the exempting entity; or (ii) a * subsidiary of the exempting entity; and (b) the employee acquired a beneficial interest in the * share on which the distribution is made: (i) under an * employee share scheme; and (ii) in circumstances specified as relevant in section 208 ‑ 215; and (c) the employee does not hold that beneficial interest as a trustee.

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) | 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) | Repealed and substituted by No 133 of 2009, effective Schedule 1 (items 1, 21–76, 86, 87): 14 Dec 2009 Schedule 2 (items 1–13, 15) and Schedule 3 (items 28–40, 44, 45): Royal Assent

s 208-215 — Eligible employee share schemes

(1) An individual acquires a beneficial interest in a * share in a company under an * employee share scheme in circumstances that are relevant for the purposes of paragraphs 208 ‑ 205(b) and 208 ‑ 235(b) if: (a) all the * ESS interests available for acquisition under the scheme relate to: (i) ordinary shares; or (ii) preference shares to which are attached substantially the same rights as are attached to ordinary shares; and (b) immediately after the individual acquires the interest: (i) he or she does not hold a beneficial interest in more than 10% of the shares in the company; and (ii) he or she is not in a position to control, or to control the casting of, more than 10% of the maximum number of votes that might be cast at a general meeting of the company; and (c) the share is not a * non ‑ equity share. (2) An individual also acquires a beneficial interest in a * share in a company under an * employee share scheme in circumstances that are relevant for the purposes of paragraphs 208 ‑ 205(b) and 208 ‑ 235(b) if: (a) the share is part of a stapled security; and (b) Subdivision 83A ‑ B or 83A ‑ C (about employee share schemes) applies to the beneficial interest in the stapled security. (3) For the purposes of paragraph (1)(b), you are taken to: (a) hold a beneficial interest in any * shares in the company that you can acquire under an * ESS interest that is a beneficial interest in a right to acquire a beneficial interest in such shares; and (b) be in a position to cast votes as a result of holding that interest in those shares.

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) | 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 56 of 2007, effective 12 Apr 2007 | Repealed and substituted by No 133 of 2009, effective Schedule 1 (items 1, 21–76, 86, 87): 14 Dec 2009 Schedule 2 (items 1–13, 15) and Schedule 3 (items 28–40, 44, 45): Royal Assent | Amended by No 105 of 2015, effective Sch 1 (items 2–41, 44–51): 1 July 2015 (s 2)

s 208-220 — What this Subdivision is about

Generally, a distribution franked with an exempting credit will only generate a tax effect for the recipient under Division 207 if a tax effect would have been generated for the recipient had the recipient received a franked distribution when the distributing entity was an exempting entity. Table of sections Operative provisions 208 ‑ 225 Division 207 does not generally apply 208 ‑ 230 Distributions to exempting entities and former exempting entities 208 ‑ 235 Distributions to employees acquiring shares under eligible employee share schemes 208 ‑ 240 Distributions to certain individuals

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 208-225 — Division 207 does not generally apply

Division 207 does not apply to a * distribution * franked with an exempting credit, unless the Division is expressly applied to the distribution under this Subdivision.

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 208-230 — Distributions to exempting entities and former exempting entities

Division 207 applies to a * distribution * franked with an exempting credit by a * former exempting entity as if it were a * franked distribution if: (a) the recipient of the distribution is a former exempting entity and the distribution gives rise to an * exempting credit for the recipient; or (b) the recipient of the distribution is an * exempting entity and the distribution gives rise to a * franking credit for the recipient; or (c) the distribution * flows indirectly to a former exempting entity and gives rise to an exempting credit for that entity; or (d) the distribution flows indirectly to an exempting entity and gives rise to a franking credit for that entity.

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 208-235 — Distributions to employees acquiring shares under eligible employee share schemes

Division 207 also applies to a * distribution * franked with an exempting credit made by a * former exempting entity as if it were a * franked distribution if: (a) the distribution is made to an individual who, at the time the distribution is made, is an employee of: (i) the former exempting entity; or (ii) a * subsidiary of the former exempting entity; and (b) the employee acquired a beneficial interest in the * share on which the distribution is made: (i) under an * employee share scheme; and (ii) in circumstances specified as relevant in section 208 ‑ 215; and (c) the employee does not hold that beneficial interest as a trustee.

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) | 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) | Repealed and substituted by No 133 of 2009, effective Schedule 1 (items 1, 21–76, 86, 87): 14 Dec 2009 Schedule 2 (items 1–13, 15) and Schedule 3 (items 28–40, 44, 45): Royal Assent

s 208-240 — Distributions to certain individuals

Division 207 also applies to a * distribution * franked with an exempting credit made by a * former exempting entity as if it were a * franked distribution if: (a) a * corporate tax entity other than a former exempting entity became an * exempting entity; and (b) immediately before the entity became an exempting entity all the accountable membership interests and accountable partial interests were beneficially owned (whether directly or indirectly) by individuals who were Australian residents; and (c) the entity became an exempting entity because some or all of the individuals ceased to be Australian residents; and (d) the entity becomes a former exempting entity because all of the individuals are or have become Australian residents; and (e) an amount attributable to a distribution * franked with an exempting credit made by the entity is included in the assessable income of such an individual; and (f) all the accountable membership interests or accountable partial interests in the entity were, throughout the period beginning when the entity became an exempting entity and ending when the amount was received by the individual mentioned in paragraph (e), beneficially owned (directly or indirectly) by that individual; and (g) the individual is an eligible continuing substantial member in relation to the distribution.

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) | 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 133 of 2009, effective Schedule 1 (items 1, 21–76, 86, 87): 14 Dec 2009 Schedule 2 (items 1–13, 15) and Schedule 3 (items 28–40, 44, 45): Royal Assent

s 210-1 — Purpose of venture capital franking

The purpose of these rules is to encourage venture capital investment by superannuation funds and other entities that deal with superannuation.

Amendment history: Inserted 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 210-5 — How is this achieved?

This is done by giving tax benefits to those entities when they invest in PDFs, which are the vehicles for venture capital investment. If the PDF makes a distribution franked with a venture capital credit, the relevant venture capital investor receives a certain part of a distribution from the PDF as exempt income and, in addition, is entitled to a tax offset equal to the venture capital credit.

Amendment history: Inserted 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 210-10 — What is a venture capital credit?

(1) There is a venture capital franking sub ‑ account in the franking account of each PDF. (2) Venture capital credits arise in the sub ‑ account if the PDF pays income tax that is reasonably attributable to capital gains from venture capital investments.

Amendment history: Inserted 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 210-15 — What does the PDF have to do to distribute the credits?

Only a participating PDF can distribute venture capital credits. A PDF elects to participate by keeping a record of its venture capital sub ‑ account.

Amendment history: Inserted 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 210-20 — Limits on venture capital franking

(1) The venture capital credit on a distribution cannot exceed the franking credit on the distribution. It is, in this sense, a species of franking credit. (2) A PDF can only distribute venture capital credits if it does it so that all members of the PDF receive venture capital credits in proportion to their holdings. (3) If a PDF has a venture capital surplus when it makes a distribution, it must frank the distribution with venture capital credits. (4) There are measures to ensure that a PDF does not maintain a venture capital deficit over a prolonged period.

Amendment history: Inserted 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 210-25 — What this Subdivision is about

A PDF can only frank a distribution with a venture capital credit if certain conditions are met. These conditions are set out in this Subdivision. Table of sections Operative provisions 210 ‑ 30 Franking a distribution with a venture capital credit

Amendment history: Inserted 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 210-30 — Franking a distribution with a venture capital credit

An entity franks a * distribution with a venture capital credit if: (a) the entity is a * participating PDF at the time the distribution is made; and (b) the distribution is * frankable with a venture capital credit; and (c) the entity allocates a * venture capital credit to the distribution.

Amendment history: Inserted 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 210-35 — What this Subdivision is about

A PDF may participate if it elects to keep a record of its venture capital sub ‑ account. Table of sections Operative provisions 210 ‑ 40 What is a participating PDF

Amendment history: Inserted 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 210-40 — What is a participating PDF

A * PDF is a participating PDF at a particular time if it keeps a record of its * venture capital sub ‑ account at that time.

Amendment history: Inserted 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 210-45 — What this Subdivision is about

A distribution can only be franked with a venture capital credit if all members of the PDF receive distributions in proportion to their holdings. Table of sections Operative provisions 210 ‑ 50 Which distributions can be franked with a venture capital credit?

Amendment history: Inserted 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 210-50 — Which distributions can be franked with a venture capital credit?

A * distribution by a * participating PDF is frankable with a venture capital credit if: (a) the distribution is a * franked distribution; and (b) the distribution is made under a resolution under which: (i) distributions are made to all members of the PDF; and (ii) the amount of the distribution per * membership interest is the same for each of those distributions.

Amendment history: Inserted 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 210-55 — What this Subdivision is about

The amount of the venture capital credit on a distribution is that stated in the distribution statement, unless the amount exceeds the franking credit on the distribution. In that case, the amount of the venture capital credit on the distribution is taken to be the same as the franking credit. Table of sections Operative provisions 210 ‑ 60 Amount of the venture capital credit on a distribution

Amendment history: Inserted 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 210-60 — Amount of the venture capital credit on a distribution

(1) The amount of the * venture capital credit on a * distribution is that stated in the * distribution statement for the distribution, unless that amount exceeds the * franking credit on the distribution. (2) If the amount of the * venture capital credit stated in the * distribution statement for a * distribution exceeds the * franking credit on the distribution, the amount of the venture capital credit is taken to be the same as the amount of the franking credit, and not the amount stated in the distribution statement.

Amendment history: Inserted 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 210-65 — What this Subdivision is about

A participating PDF that makes a distribution franked with a venture capital credit must provide additional information in the distribution statement given to the recipient. Table of sections Operative provisions 210 ‑ 70 Additional information to be included when a distribution is franked with a venture capital credit

Amendment history: Inserted 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 210-70 — Additional information to be included when a distribution is franked with a venture capital credit

(1) A * participating PDF that makes a * distribution * franked with a venture capital credit must include in the * distribution statement given to the recipient: (a) a statement that there is a * venture capital credit of a specified amount on the distribution; and (b) a statement to the effect that the venture capital credit is only relevant for a taxpayer who is: (i) the trustee of an entity that is a * complying superannuation entity in relation to the income year in which the distribution is made and is not a * self managed superannuation fund; or (iv) a * life insurance company. (2) If, under subsection (1), a statement must be included in a * distribution statement, the distribution statement is taken not to have been given unless the statement is included.

Amendment history: Inserted 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 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) | 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 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 210-75 — What this Subdivision is about

If a PDF has a venture capital surplus when it makes a distribution frankable with venture capital credits, it must frank the distribution with venture capital credits. Table of sections Operative provisions 210 ‑ 80 Draining the venture capital surplus when a distribution frankable with venture capital credits is made 210 ‑ 81 Distributions to be franked with venture capital credits to the same extent 210 ‑ 82 Consequences of breaching the rule in section 210 ‑ 81

Amendment history: Inserted 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 210-80 — Draining the venture capital surplus when a distribution frankable with venture capital credits is made

(1) If a * participating PDF would otherwise have a * venture capital surplus at the time a * distribution that is * frankable with a venture capital credit is made, the PDF must either: (a) allocate a * venture capital credit to the distribution that is equal to the * franking credit on the distribution; or (b) allocate a venture capital credit to the distribution that either alone or when added to venture capital credits allocated to other distributions made under the resolution of the PDF under which the distribution in question is made, reduces the surplus to nil, or creates a * venture capital deficit. (2) A * venture capital debit arises for a * participating PDF when a * distribution is made if the PDF does not allocate a * venture capital credit in accordance with subsection (1). The amount of the debit is: where: actual franked amount is the amount of the * venture capital credit that is allocated to the * distribution by the PDF (this may be nil). subsection (1) franked amount is the amount of the * venture capital credit that would have been allocated to the * distribution if the PDF had made the smallest allocation needed to satisfy subsection (1).

Amendment history: Inserted 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 210-81 — Distributions to be franked with venture capital credits to the same extent

(1) If a * PDF * franks a * distribution with a venture capital credit, it must frank each other distribution made under the same resolution with a venture capital credit worked out using the same venture capital percentage. (2) The venture capital percentage for a * distribution is worked out using the formula:

Amendment history: Inserted 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 210-82 — Consequences of breaching the rule in section 210 ‑ 81

If a * PDF * franks a * distribution with a venture capital credit in breach of section 210 ‑ 81: (a) the distribution is taken not to have been franked with a venture capital credit; and (b) each other distribution made under the same resolution is taken not to have been franked with a venture capital credit.

Amendment history: Inserted 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 210-85 — What this Subdivision is about

This Subdivision: • creates a venture capital sub ‑ account for each PDF; and • identifies when venture capital credits and debits arise in the sub ‑ account and the amount of those credits and debits; and • identifies when there is a venture capital surplus or deficit in the sub ‑ account; and • creates a liability to pay venture capital deficit tax if the account is in deficit at certain times. Table of sections 210 ‑ 90 The venture capital sub ‑ account 210 ‑ 95 Venture capital deficit tax Operative provisions 210 ‑ 100 Venture capital sub ‑ account 210 ‑ 105 Venture capital credits 210 ‑ 110 Determining the extent to which a franking credit is reasonably attributable to a particular payment of tax 210 ‑ 115 Participating PDF may elect to have venture capital credits arise on its assessment day 210 ‑ 120 Venture capital debits 210 ‑ 125 Venture capital debit where CGT limit is exceeded 210 ‑ 130 Venture capital surplus and deficit 210 ‑ 135 Venture capital deficit tax 210 ‑ 140 Effect of a liability to pay venture capital deficit tax on franking deficit tax 210 ‑ 145 Effect of a liability to pay venture capital deficit tax on the franking account 210 ‑ 150 Deferring venture capital deficit

Amendment history: Inserted 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 210-90 — The venture capital sub ‑ account

(1) Each PDF has a venture capital sub ‑ account in its franking account. The sub ‑ account exists even if the PDF does not elect to become a participating PDF by keeping a record of it. (2) To the extent that income tax is reasonably attributable to capital gains from venture capital investments, it generates a venture capital credit in the sub ‑ account. There are other circumstances in which a venture capital credit arises. (3) If a PDF receives a refund of that tax, a venture capital debit will arise for the PDF. There are other circumstances in which a venture capital debit will arise, such as on the payment of a distribution franked with a venture capital credit.

Amendment history: Inserted 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 210-95 — Venture capital deficit tax

(1) Venture capital deficit tax is payable if a PDF’s venture capital sub ‑ account is in deficit at the end of the PDF’s income year, or immediately before it ceases to be a PDF. (2) A PDF’s venture capital sub ‑ account may be in deficit, even if its franking account is not. This can happen because only income tax on income of a particular kind (capital gains on venture capital investments) gives rise to venture capital credits. This means that when a PDF anticipates a venture capital credit, it is not only anticipating that income tax will be paid, but that income tax on income of that kind will be paid. Although income tax may, in fact, later be paid, it will not necessarily be income of the kind that would give rise to a venture capital credit. This results in franking credits arising even while the venture capital sub ‑ account remains in deficit. (3) The discrepancy between the franking account balance and the venture capital sub ‑ account balance can also arise because venture capital credits do not necessarily arise at the same time as the relevant franking credits and debits (see item 1 of the table in section 210 ‑ 105 and item 2 of the table in section 210 ‑ 120).

Amendment history: Inserted 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 210-100 — Venture capital sub ‑ account

Each * PDF has a venture capital sub ‑ account within its * franking account. Note: The balance in the venture capital sub ‑ account on 1 July 2002 will be either nil or, if the entity has a venture capital 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 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 210-105 — Venture capital credits

The table sets out when a credit arises in the * venture capital sub ‑ account of a * PDF. A credit in a PDF’s venture capital sub ‑ account is called a venture capital credit . Credits in the venture capital sub ‑ account Item If: A credit of: Arises on: 1 the * PDF has a * franking credit because it has * paid a PAYG instalment; and the whole or part of the instalment is reasonably attributable to a * CGT event in relation to a * qualifying SME investment of the PDF that part of the franking credit that is reasonably attributable to the CGT event the day on which the franking credit arises; or if the PDF elects to have the * venture capital credit arise on the assessment day under section 210 ‑ 115—on that day 2 the * PDF has a * franking credit because it has * paid income tax; and the whole or part of the payment is reasonably attributable to a * CGT event in relation to a * qualifying SME investment of the PDF that part of the franking credit that is reasonably attributable to the CGT event the day on which the franking credit arises; or if the PDF elects to have the * venture capital credit arise on the assessment day under section 210 ‑ 115—on that day 3 the * PDF incurs a liability to pay * venture capital deficit tax the amount of the liability immediately after the liability is incurred

Amendment history: Inserted 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 210-110 — Determining the extent to which a franking credit is reasonably attributable to a particular payment of tax

In determining the extent to which a * franking credit is reasonably attributable to a * CGT event in relation to a * qualifying SME investment of the * PDF, have regard to: (a) the extent to which the credit can reasonably be attributed to the * payment of a PAYG instalment or the payment of income tax by the PDF in relation to its * section 124ZZB SME assessable income for an income year; and (b) the extent to which the section 124ZZB SME assessable income can reasonably be attributed to the CGT event.

Amendment history: Inserted 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 210-115 — Participating PDF may elect to have venture capital credits arise on its assessment day

(1) Before a * PDF’s assessment day for an income year, the PDF may elect to have the * venture capital credits that arise because of the * payment of PAYG instalments and income tax during that income year arise on the assessment day. (2) The * PDF’s assessment day for an income year is the earlier of: (a) the day on which the PDF furnishes its * income tax return for the income year; or (b) the day on which the Commissioner makes an assessment of the amount of the PDF’s taxable income for that year under section 166 of the Income Tax Assessment Act 1936 .

Amendment history: Inserted 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 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 210-120 — Venture capital debits

The table sets out when a debit arises in the * venture capital sub ‑ account of a * PDF. A debit in a PDF’s venture capital sub ‑ account is called a venture capital debit . Debits in the venture capital sub ‑ account Item If: A debit of: Arises on: 1 the * PDF makes a * distribution * franked with a venture capital credit the amount of the * venture capital credit the day on which the distribution is made 2 the * PDF receives a * franking debit as a result of * receiving a refund of income tax; and all or part of the refund is attributable to a * payment of a PAYG instalment or a payment of income tax that gave rise to a * venture capital credit of the PDF that part of the refund that is attributable to a payment of a PAYG instalment or a payment of income tax that gave rise to a venture capital credit of the PDF the day on which the franking debit arises; or if the venture capital credit did not arise until a later day—that later day 3 a * venture capital debit arises for the * PDF under subsection 210 ‑ 80(2) the amount of the venture capital debit arising under that subsection the day on which the * distribution giving rise to the venture capital debit is made 4 the Commissioner makes a determination under paragraph 204 ‑ 30(3)(a) giving rise to a * franking debit for the * PDF (streaming distributions); and the * imputation benefit underlying the determination is a * tax offset under section 210 ‑ 170 the amount of the tax offset on the day on which the franking debit arises 5 a * venture capital debit arises for the * PDF under section 210 ‑ 125 because its net venture capital credits for an income year exceed certain limits the amount of the excess the last day of the income year

Amendment history: Inserted 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 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 210-125 — Venture capital debit where CGT limit is exceeded

(1) A * venture capital debit arises for a * PDF where the PDF’s net venture capital credits for the income year exceed whichever is the lesser of: (a) the PDF’s CGT limit for that income year; and (b) the tax paid by the PDF on its * SME income component for that income year. Net venture capital credits (2) The * PDF’s net venture capital credits for the income year is: where: venture capital credits is the total * venture capital credits of the * PDF that relate to tax in relation to taxable income of that income year. venture capital debits is the total * venture capital debits of the * PDF that relate to tax in relation to taxable income of that income year. CGT limit (3) The * PDF’s CGT limit for the income year is worked out using the formula: where: ordinary capital gains from all SME CGT events means the total of the * ordinary capital gains for the income year for * CGT events in relation to * SME investments of the * PDF. ordinary capital gains from venture capital CGT events means the total of * ordinary capital gains for the income year for * CGT events in relation to shares in companies that are * qualifying SME investments. SME tax rate is the tax rate applicable to the * SME income component of the * PDF for the income year. Tax paid by the PDF on its SME income component (4) The tax paid by the PDF on its SME income component for the income year is the tax paid by the * PDF on its * SME income component after allowing * tax offsets referred to in section 4 ‑ 10 .

Amendment history: Inserted 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 210-130 — Venture capital surplus and deficit

(1) A * PDF’s * venture capital sub ‑ account is in surplus at a particular time if, at that time, the sum of the * venture capital credits in the account exceeds the sum of the * venture capital debits in the account. The amount of the venture capital surplus is the amount of the excess. (2) A * PDF’s * venture capital sub ‑ account is in deficit at a particular time if, at that time, the sum of the * venture capital debits in the account exceeds the sum of the * venture capital credits in the account. The amount of the venture capital deficit is the amount of the excess. (3) A * PDF’s * venture capital sub ‑ account may be in * deficit even though its * franking account as a whole is in * surplus. Similarly, a PDF’s venture capital sub ‑ account may be in surplus even though its franking account as a whole is in deficit.

Amendment history: Inserted 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 210-135 — Venture capital deficit tax

(1) While recognising that an entity may anticipate * venture capital 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 * venture capital sub ‑ account at certain times and levying tax if the account is in * deficit. (2) An entity is liable to pay * venture capital deficit tax imposed by the New Business Tax System (Venture Capital Deficit Tax) Act 2003 if its * venture capital sub ‑ account is in * deficit at the end of an income year. (3) An entity is liable to pay * venture capital deficit tax imposed by the New Business Tax System (Venture Capital Deficit Tax) Act 2003 if: (a) it ceases to be a * PDF; and (b) immediately before it ceases to be a PDF, its * venture capital sub ‑ account is in * deficit.

Amendment history: Inserted 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 210-140 — Effect of a liability to pay venture capital deficit tax on franking deficit tax

(1) If an entity is liable to pay * venture capital deficit tax under subsection 210 ‑ 135(2) because its * venture capital sub ‑ account is in * deficit at the end of an income year, the amount (if any) of * franking deficit tax that the entity would otherwise be liable to pay under subsection 205 ‑ 45(2) because its * franking account is in * deficit at that time is reduced by the amount of the liability for venture capital deficit tax. (2) If an entity is liable to pay * venture capital deficit tax under subsection 210 ‑ 135(3) because it ceases to be a * PDF during an income year, the amount (if any) of * franking deficit tax that the entity would otherwise be liable to pay under subsection 205 ‑ 45(3) because it ceases to be a * franking entity at that time is reduced by the amount of the liability for * venture capital deficit tax.

Amendment history: Inserted 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 210-145 — Effect of a liability to pay venture capital deficit tax on the franking account

(1) If an entity incurs a liability to pay * venture capital deficit tax, a * franking credit arises for the entity immediately after the liability arises (the relevant day ). (2) The amount of the * franking credit is equal to: (a) if no liability to pay * franking deficit tax arises on the relevant day—the amount of the * venture capital deficit tax; or (b) if a liability to pay franking deficit tax also arises on the relevant day—the amount of the venture capital deficit tax reduced by the amount of the franking deficit tax.

Amendment history: Inserted 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)