Document ID: chunk:federal_register_of_legislation:C2004A00975:clause:1_1:p2
Version: federal_register_of_legislation:C2004A00975
Segment Type: clause
Provision Reference: sch 1 cl 1 (pt 2/20)
Character Range: 4118–6833

some kinds of distribution can be franked. These are called frankable distributions.

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

 (1) A corporate tax entity must not frank a distribution from profits with a franking credit that exceeds the maximum amount of income tax that could have been paid by the entity on the profits distributed.

 (2) If a distribution is franked in excess of this limit, the entity will be taken to have franked the distribution with the maximum franking credit for the distribution.

200‑30  Benchmark rule

 (1) All frankable distributions made within a particular period must be franked to the same extent. This is the benchmark rule.

 (2) It is designed to ensure that one member of a corporate tax entity is not preferred over another by the manner in which distributions are franked.

200‑35  Effect of receiving a franked distribution

 (1) Under Division 207, if an Australian member of a corporate tax entity receives a franked distribution, the member can usually offset, against the member's own income tax liability, income tax paid by the entity on the profits underlying the distribution.

 (2) The tax offset to which the member is entitled is equal to the franking credit on the distribution.

Note 1: A member may be entitled to a refund under Division 67 if the sum of the tax offset and certain other tax offsets exceeds the amount of income tax that the member would have to pay if the member had not got those tax offsets.

Note 2: If the member is not a resident, the tax effects of receiving a distribution will be dealt with under Division 11A of Part III of the Income Tax Assessment Act 1936, and Subdivision 207‑D of this Part.

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

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

200‑45  Special rules for franking by some entities

  There are special rules to deal with:
 (a) venture capital franking by a pooled development fund; and
 (b) franking by life insurance companies; and
 (c) franking by exempting companies and former exempting companies.

Division 201—Objects and application of Part 3‑6

Table of sections

201‑1 Objects
201‑5 Application of this Part

201‑1  Objects

 (1) The main object of this Part is to allow certain *corporate tax entities to pass to their *members the benefit of having paid income tax on the profits underlying certain *distributions.

 (2) The other objects