Document ID: chunk:federal_register_of_legislation:C2010C00610:clause:7_5:p2
Version: federal_register_of_legislation:C2010C00610
Segment Type: clause
Provision Reference: sch 7 cl 5 (pt 2/2)
Character Range: 33860–35403

tax offset exceeds that amount, the excess will be included in a tax offset for the next income year for which the entity satisfies the residency requirement: see paragraph (1)(c) and step 4 of the method statement.

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 overseas tax paid by the entity (the foreign tax credit).

 Under subsection (3), the foreign tax credit must be applied before the franking deficit offset is applied. As a result, that credit 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.