Document ID: chunk:federal_register_of_legislation:C2025C00029:section:14:p6
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 14 (pt 6/14)
Character Range: 3503791–3506518

a corporate tax entity makes a franked distribution to one of its members, then, as a general rule:
 (a) an amount equal to the franking credit on the distribution is included in the member's assessable income; and
 (b) the member is entitled to a tax offset equal to the same amount.
 (2) In some cases a residency requirement must be satisfied for the general rule to apply.
 (3) If a franked distribution is made to a member that is a partnership or the trustee of a trust, an amount equal to the franking credit on the distribution is also included in the member's assessable income as mentioned in paragraph (1)(a).
 (4) However, a tax offset in relation to that distribution is only available to an entity (who may be a partner, beneficiary or a trustee) if the distribution flows indirectly to it and does not flow indirectly through it to another entity. The tax offset is equal to its share of the franking credit on the distribution.
Note: That share is a notional amount and the entity can have that share without actually receiving any of that franking credit or distribution.
 (5) There are exceptions to both the general rule mentioned in subsection (1) and the special rule mentioned in subsection (4). Basically, these exceptions are created:
 (a) where the relevant entity would not have paid tax on the distribution or a share of the distribution (see Subdivisions 207‑D and 207‑E); and
 (b) where there is a manipulation of the imputation system in a manner that is not permitted under the income tax law (see Subdivision 207‑F).

Subdivision 207‑A—Effect of receiving a franked distribution generally

Guide to Subdivision 207‑A

207‑10  What this Subdivision is about

      As a general rule, if a member of an entity receives a franked distribution:
         • an amount equal to the franking credit on the distribution is included in the member's assessable income; and
         • the member is entitled to a tax offset equal to the franking credit on the distribution.

Table of sections

Operative provisions
207‑15 Applying the general rule
207‑20 General rule—gross‑up and tax offset

Operative provisions

207‑15  Applying the general rule
 (1) This Subdivision sets out, as a general rule, the tax effect of receiving a *franked distribution.
 (2) This Subdivision does not apply to:
 (a) a partnership or trustee to whom a *franked distribution is made (except a partnership or trustee that is a *corporate tax entity, or a trustee of a trust that is a *complying superannuation entity, when the distribution is made); or
 (b) an entity to whom a franked distribution *flows indirectly.
Note: Subject to the other provisions in this Division, Subdivision 207‑B applies to an entity excluded from