Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p5
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 5/34)
Character Range: 3536831–3539531

*non‑assessable non‑exempt income in the hands of the entity;
then, for the purposes of this Act:
 (d) the amount of the distribution is taken to have been reduced by the relevant part; and
 (e) the amount of the *franking credit on the distribution is to be worked out as follows:

207‑95  Distribution that flows indirectly to an entity

Whole of share of distribution not assessable
 (1) If:
 (a) a *franked distribution *flows indirectly to an entity in an income year; and
 (b) the entity's *share of the distribution would, in its hands, be *exempt income or *non‑assessable non‑exempt income (whether or not it had actually received that share);
then, for the purposes of this Act:
 (c) subsection (2), (3) or (4) (as appropriate) applies to the entity in relation to that income year; and
 (d) the entity is not entitled to a *tax offset under this Division because of the distribution; and
 (e) if the distribution flows indirectly through the entity to another entity—subsection 207‑35(3) and section 207‑45 do not apply to that other entity.
Note: This section can therefore apply, for example, where the entity is a partner in a partnership that has a partnership loss and the entity does not actually receive any of the distribution.

Partner
 (2) If the *franked distribution *flows indirectly to the entity as a partner in a partnership under subsection 207‑50(2), the entity can deduct an amount for that income year that is equal to its *share of the *franking credit on the distribution.

Beneficiary
 (3) If the *franked distribution *flows indirectly to the entity as a beneficiary of a trust under subsection 207‑50(3), the entity can deduct an amount for that income year that is equal to the lesser of:
 (a) its share amount in relation to the distribution that is mentioned in that subsection; and
 (b) its *share of the *franking credit on the distribution.

Trustee
 (4) If the *franked distribution *flows indirectly to the entity as the trustee of a trust under subsection 207‑50(4), the entity's share amount in relation to the distribution that is mentioned in that subsection is to be reduced by the lesser of:
 (a) that share amount; and
 (b) its *share of the *franking credit on the distribution.
Example: A franked distribution of $70 is made to a partnership.
 Under section 207‑35, an additional amount of $30 is included in the partnership's assessable income because of the distribution.
 The partnership has 2 equal partners, X and Y. X is a foreign resident individual whose share of partnership's net income for the income year is $50 (share of distribution of $35 and share of franking credit of $15). That share of distribution is not assessable income and