Document ID: chunk:federal_register_of_legislation:C2025C00029:section:14:p4
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 14 (pt 4/14)
Character Range: 3498930–3501634

deficit tax that is covered by paragraph (1)(a).
            Then, subject to subsections (5) and (6), reduce so much of it as is attributable to *franking debits to which subsection (8) applies by 30% if that part exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account for the relevant year.
           Step 2. Work out the total amount of *franking deficit tax that is covered by paragraph (1)(b) for a previous income year.
            Then, subject to subsections (5) and (6), reduce so much of it as is attributable to *franking debits to which subsection (8) applies by 30% if that part exceeds 10% of the total amount of *franking credits that arose in the entity's *franking account for that previous income year.
           Step 3. Add up the results of step 2 for all the previous income years covered by paragraph (1)(b).
           Step 4. Work out the remaining amount of a *tax offset covered by paragraph (1)(c).
           Step 5. Add up the results of steps 1, 3 and 4. The result is the *tax offset to which the entity is entitled under this section for the relevant year.
Note: This method statement is modified for certain late balancing entities: see section 205‑70 of the Income Tax (Transitional Provisions) Act 1997.
Example: The following apply to a corporate tax entity that satisfies the residency requirement for an income year:
• the entity's income tax liability for that year would be $100,000 if its tax offsets were disregarded;
• for that year, the entity has a tax offset of $60,000 under this section (the franking deficit offset) and a tax offset of $80,000 in respect of foreign income tax paid by the entity (the foreign income tax offset).
 Under section 63‑10 (about tax offset priority rules), the foreign income tax offset must be applied before the franking deficit offset is applied. As a result, that offset and $20,000 of the franking deficit offset combine to reduce the entity's income tax liability to nil. The remaining $40,000 of the franking deficit offset will be included in a franking deficit offset for the next income year for which the entity satisfies the residency requirement.

Residency requirement
 (4) To determine whether the entity satisfies the *residency requirement for the relevant year, section 205‑25 has effect as if each of the following were an event specified in a relevant table for the purposes of that section:
 (a) the entity incurring a liability to pay *franking deficit tax in the relevant year;
 (b) the assessment of the entity's *income tax liability for the relevant year that is made on the *assessment day for that year.

30% reduction will generally not apply to private