Document ID: chunk:federal_register_of_legislation:C2025C00014:section:177ea:p1
Version: federal_register_of_legislation:C2025C00014
Segment Type: section
Provision Reference: s 177EA (pt 1/6)
Character Range: 1625490–1628232

177EA  Creation of franking debit or cancellation of franking credits
 (1) In this section, unless the contrary intention appears:
relevant circumstances has a meaning affected by subsection (17).
relevant taxpayer has the meaning given by subsection (3).
scheme for a disposition, in relation to membership interests or an interest in membership interests, has a meaning affected by subsection (14).
 (2) An expression used in this section that is defined in the Income Tax Assessment Act 1997 has the same meaning as in that Act, except to the extent that its meaning is extended by subsection (16), (18) or (19), or affected by subsection (15).

Application of section
 (3) This section applies if:
 (a) there is a scheme for a disposition of membership interests, or an interest in membership interests, in a corporate tax entity; and
 (b) either:
 (i) a frankable distribution has been paid, or is payable or expected to be payable, to a person in respect of the membership interests; or
 (ii) a frankable distribution has flowed indirectly, or flows indirectly or is expected to flow indirectly, to a person in respect of the interest in membership interests, as the case may be; and
 (c) the distribution was, or is expected to be, a franked distribution or a distribution franked with an exempting credit; and
 (d) except for this section, the person (the relevant taxpayer) would receive, or could reasonably be expected to receive, imputation benefits as a result of the distribution; and
 (e) having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling the relevant taxpayer to obtain an imputation benefit.

Bare acquisition of membership interests or interest in membership interests
 (4) It is not to be concluded for the purposes of paragraph (3)(e) that a person entered into or carried out a scheme for a purpose mentioned in that paragraph merely because the person acquired membership interests, or an interest in membership interests, in the entity.

Commissioner to determine franking debit or deny franking credit
 (5) The Commissioner may make, in writing, either of the following determinations:
 (a) if the corporate tax entity is a party to the scheme, a determination that a franking debit or exempting debit of the entity arises in respect of each distribution made to the relevant taxpayer or that flows indirectly to the relevant taxpayer;
 (b) a determination that no imputation benefit is to arise in respect of a distribution or a specified part of a distribution that