Document ID: chunk:federal_register_of_legislation:C2010C00648:clause:10_7:p3
Version: federal_register_of_legislation:C2010C00648
Segment Type: clause
Provision Reference: sch 10 cl 7 (pt 3/6)
Character Range: 184463–187115

share of the net income therefore does not include any of the franking credit.

207‑45  Tax offset—distribution flows indirectly to an entity

  An entity to whom a *franked distribution *flows indirectly in an income year is entitled to a *tax offset for that income year that is equal to its *share of the *franking credit on the distribution, if it is:
 (a) an individual; or
 (b) a *corporate tax entity when the distribution flows indirectly to it; or
 (c) the trustee of a trust that is liable to be assessed on a share of, or all or a part of, the trust's *net income under section 98, 99 or 99A of the Income Tax Assessment Act 1936 for that income year; or
 (d) the trustee of an eligible entity within the meaning of Part IX of that Act in relation to that income year.

Note 1: Certain superannuation funds, ADFs and PSTs are eligible entities within the meaning of Part IX of the Income Tax Assessment Act 1936.

Note 2: The entities covered by this section are the ultimate recipients of the distribution because the distribution does not flow indirectly through them to other entities. As a result they are also the ultimate taxpayers in respect of the distribution and are given the tax offset to acknowledge the income tax that has already been paid on the profits underlying the distribution.

Key concepts

207‑50  When a franked distribution flows indirectly to or through an entity

 (1) For the purposes of this Subdivision, this section sets out the only circumstances in which a *franked distribution:
 (a) flows indirectly to an entity (subsection (2), (3) or (4)); or
 (b) flows indirectly through an entity (subsection (5)).

Partners

 (2) A *franked distribution flows indirectly to a partner in a partnership in an income year if, and only if:
 (a) during that income year, the distribution is made to the partnership, or *flows indirectly to the partnership as a beneficiary because of a previous application of subsection (3); and
 (b) the partner has an individual interest:
 (i) in the partnership's *net income for that income year that is covered by paragraph 92(1)(a) or (b) of the Income Tax Assessment Act 1936; or
 (ii) in a *partnership loss of the partnership for that income year that is covered by paragraph 92(2)(a) or (b) of that Act;
  (whether or not that individual interest becomes assessable income in the hands of the partner); and
 (c) the partner's *share of the distribution under section 207‑55 is a positive amount (whether or not the partner actually receives any of that share).

Beneficiaries

 (3) A *franked distribution flows indirectly to a beneficiary of a trust in an income year if,