Document ID: chunk:federal_register_of_legislation:C2025C00014:section:124zm:p1
Version: federal_register_of_legislation:C2025C00014
Segment Type: section
Provision Reference: s 124ZM (pt 1/3)
Character Range: 1189819–1192519

124ZM  Treatment distributions to shareholders in PDF

Unfranked part of distribution exempt from income tax
 (1) If a company makes a distribution to a shareholder at a time when the company is a PDF, the unfranked part of the distribution is exempt from income tax.

Rest of section deals with franked part
 (2) The rest of this section applies to the franked part of the distribution.

Usual case
 (3) Subsection (4) applies if the assessable income of a year of income of a taxpayer who or that is:
 (a) a company or a natural person (other than a company or natural person in the capacity of a trustee); or
 (c) a public trading trust in relation to that year of income; or
 (d) a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust in relation to that year of income;
would (apart from subsection (4)) include:
 (e) the franked part of the distribution; or
 (f) any of the franked part of the distribution that flows indirectly to the taxpayer.
This subsection does not apply to cases dealt with in subsections (5) and (6).
 (4) Subject to subsection (7), the following is exempt income of the taxpayer:
 (a) if paragraph (3)(e) applies—the franked part;
 (b) if paragraph (3)(f) applies—so much of the franked part of the distribution as flows indirectly to the taxpayer.

Taxpayers who qualify for venture capital franking tax offset
 (5) If a taxpayer (other than a life assurance company) is entitled to a tax offset in relation to the distribution under section 210‑170 of the Income Tax Assessment Act 1997, then:
 (a) so much of the franked part of the distribution as equals the part of the distribution that is franked with a venture capital credit is exempt income of the taxpayer; and
 (b) if the franked part exceeds the amount so exempt—the excess is, subject to subsection (7), exempt income of the taxpayer.
 (6) If a life assurance company is entitled to a tax offset in relation to the distribution under section 210‑170 of the Income Tax Assessment Act 1997, then:
 (a) so much of the franked part of the distribution as equals the amount worked out using the following formula is exempt income of the life assurance company:

  where:
  complying superannuation class of taxable income is the life assurance company's complying superannuation class of taxable income, within the meaning of the Income Tax Assessment Act 1997, for the year of income in which the distribution is made.
  venture capital franked part is the part of the distribution that is franked with a venture capital credit.
  total income is the life assurance company's assessable