Document ID: chunk:federal_register_of_legislation:C2004A00975:clause:1_3:p4
Version: federal_register_of_legislation:C2004A00975
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 4/11)
Character Range: 96227–99096

Effect of exempt income on gross up and tax offset

Tax effect on the entity to whom the distribution is made—no indirect flow through

 (1) Where:
 (a) a *franked distribution is made to an entity (the receiving entity); and
 (b) the distribution does not *flow indirectly to another entity; and
 (c) the distribution is *exempt income of the receiving entity; and
 (d) the distribution is not dealt with in section 207‑120; and
 (e) the receiving entity is not an *exempt institution that is eligible for a refund;
then:
 (f) the *franking credit on the distribution is not included in the assessable income of the receiving entity under subsection 207‑20(1); and
 (g) the receiving entity is not entitled to a *tax offset under subsection 207‑20(2) as a result of the distribution.

Tax effect on the entity to whom the distribution is made—indirect flow through

 (2) Where:
 (a) a *franked distribution is made to an entity (the receiving entity); and
 (b) the distribution *flows indirectly to another entity; and
 (c) the distribution is *exempt income of the receiving entity; and
 (d) the distribution is not dealt with in section 207‑120; and
 (e) the receiving entity is not an *exempt institution that is eligible for a refund;
the assessable income of the receiving entity does not include the *franking credit on the distribution under section 207‑40.

Tax effect on other entities through which the distribution flows indirectly

 (3) Where:
 (a) a *franked distribution *flows indirectly to an entity (the flow‑through entity); and
 (b) the distribution *flows indirectly through the flow‑through entity to another entity; and
 (c) the distribution is *exempt income of the flow‑through entity; and
 (d) the distribution is not dealt with in section 207‑120; and
 (e) the flow‑through entity is not an *exempt institution that is eligible for a refund;
then:
 (f) the flow‑through entity is allowed:
 (i) where the distribution flows indirectly to the flow‑through entity as a partner in a *partnership or a beneficiary of a trust—a deduction from its assessable income; or
 (ii) where the distribution flows indirectly to the flow‑through entity under subsection 207‑35(4) as trustee of a trust—a reduction of its assessable income;
  of an amount worked out under Subdivision 207‑J; and
 (g) where an entity to whom the distribution flows indirectly through the flow‑through entity would, but for this subsection, be entitled to a *tax offset under subsection 207‑50(1) because of the distribution—that entity is not entitled to the tax offset.

Tax effect of ultimate recipient of indirect flow‑through

 (4) Where:
 (a) a *franked distribution *flows indirectly to an entity (the ultimate recipient); and
 (b) the distribution does not flow indirectly through the ultimate recipient to another entity; and
 (c) the distribution is *exempt income