Document ID: chunk:federal_register_of_legislation:C2025C00029:section:11:p42
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 11 (pt 42/64)
Character Range: 3406032–3408683

income tax liabilities of an Australian corporate tax entity and its members by:
 (a) allowing the entity, when distributing profits to its members, to pass to those members credit for income tax paid by the entity on those profits; and
 (b) allowing the entity's Australian members to claim a tax offset for that credit; and
 (c) allowing the entity's Australian members to claim a refund if they are unable to fully utilise the tax offset in reducing their income tax.

200‑10  Franking a distribution
  When an Australian corporate tax entity distributes profits to its members, the entity has the option of passing to those members credit for income tax paid by the entity on the profits. This is done by franking the distribution.

200‑15  The franking account
 (1) A franking account is used to keep track of income tax paid by the entity, so that the entity can pass to its members the benefit of having paid that tax when a distribution is made.
 (2) Each corporate tax entity has a franking account.
 (3) Typically, a corporate tax entity receives a credit in the account if the entity pays income tax or receives a franked distribution. A credit in the franking account is called a franking credit.
 (4) Typically, a corporate tax entity receives a debit in the account if the entity receives a refund of tax or franks a distribution to its members. A debit in the franking account is called a franking debit.

200‑20  How a distribution is franked
 (1) A corporate tax entity franks a distribution by allocating a franking credit to it.
 (2) The amount of the franking credit on the distribution is the amount specified in a statement that accompanies the distribution.
 (3) Only some kinds of distribution can be franked. These are called frankable distributions.

200‑25  A corporate tax entity must not give its members credit for more tax than the entity has paid
 (1) A corporate tax entity must not frank a distribution from profits with a franking credit that exceeds the maximum amount of income tax that could have been paid, at the entity's corporate tax rate for imputation purposes for the income year in which the distribution is made, on the profits distributed.
 (2) If a distribution is franked in excess of this limit, the entity will be taken to have franked the distribution with the maximum franking credit for the distribution.

200‑30  Benchmark rule
 (1) All frankable distributions made within a particular period must be franked to the same extent. This is the benchmark rule.
 (2) It is designed to ensure that one member of a corporate tax entity is not preferred over another by the manner in which distributions