Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p25
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 25/34)
Character Range: 3586762–3589699

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.

208‑10  Former exempting entities
  When an entity ceases to be an exempting entity, it becomes a former exempting entity.

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.

Subdivision 208‑A—What are exempting entities and former exempting entities?

Table of sections
208‑20 Exempting entities
208‑25 Effective ownership of entity by prescribed persons
208‑30 Accountable membership interests
208‑35 Accountable partial interests
208‑40 Prescribed persons
208‑45 Persons who are taken to be prescribed persons
208‑50 Former exempting companies

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.

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