INCOME TAX ASSESSMENT ACT 1997 - SECT 207.150 Distribution that flows indirectly to an entity

INCOME TAX ASSESSMENT ACT 1997 - SECT 207.150

Whole of share of distribution manipulated

  (1)   If a * franked distribution * flows indirectly to an entity in an income year in one or more of the following circumstances:

  (a)   the entity is not a qualified person in relation to the distribution for the purposes of Division   1A of former Part   IIIAA of the Income Tax Assessment Act 1936 ;

  (b)   the Commissioner has made a determination under paragraph   177EA(5)(b) of that Act that no imputation benefit (within the meaning of that section) is to arise in respect of the distribution for the entity;

  (c)   the Commissioner has made a determination under paragraph   204 - 30(3)(c) of this Act that no * imputation benefit is to arise in respect of the distribution for the entity;

  (d)   the distribution is treated as an interest payment for the entity under section   207 - 160 of this Act;

  (e)   the distribution is made as part of a * dividend stripping operation;

  (ea)   the distribution is one to which section   207 - 157 (which is about distribution washing) applies;

  (eb)   the distribution is one to which section   207 - 158 (which is about foreign income tax deductions) applies;

then, for the purposes of this Act:

  (f)   subsection   (2), (3) or (4) (as appropriate) applies to the entity in relation to that income year; and

  (g)   the entity is not entitled to a * tax offset under this Division because of the distribution; and

  (h)   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.

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.

Part of share of distribution manipulated

  (5)   If:

  (a)   a * franked distribution * flows indirectly to an entity in an income year; and

  (b)   the Commissioner has made a determination under paragraph   177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution (the specified part ) for the entity;

then, subsection   (2), (3) or (4) (as appropriate) applies to the entity on the basis that the amount of its * share of the * franking credit on the distribution is worked out as follows:

  (6)   In addition, the following apply to an entity covered by subsection   (5):

  (a)   if the distribution would otherwise * flow indirectly through the entity--the entity's * share of the distribution for the purposes of this Act (other than subsection   (2), (3) or (4)) is to be reduced by the specified part mentioned in subsection   (5);

  (b)   if the entity would otherwise be entitled to a * tax offset under this Division because of the distribution--the amount of the tax offset is to be worked out as follows:

Example:   X is a partner in a partnership to which a franked distribution of $140 is made. The franking credit on the distribution ($60) is included in the assessable income of the partnership under section   207 - 35. X's share of the distribution is $70 and its share of the franking credit on the distribution is $30.

  The Commissioner has made a determination under paragraph   177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise for X in respect of $42 of the distribution.

  Under subsection   (5), X will be allowed a deduction of $18.

  X is the trustee of a trust and the distribution will flow indirectly through X to beneficiaries of the trust. For the purposes of working out a beneficiary's share of the distribution and its share of the franking credit, X's share of the franked distribution is reduced to $28 under this subsection.

What happens if both subsection   207 - 95(1) and subsection   (1) of this section would apply

  (7)   If, apart from this subsection, both subsection   207 - 95(1) and subsection   (1) of this section would apply to an entity in relation to a * franked distribution, then:

  (a)   subsection   (1) of this section applies to the entity; but

  (b)   subsection   207 - 95(1) does not apply to the entity.

What happens if both subsection   207 - 95(5) and subsection   (5) of this section would apply

  (8)   If, apart from this subsection, both subsection   207 - 95(5) and subsection   (5) of this section would apply to an entity in relation to a * franked distribution, then:

  (a)   apply subsections   207 - 95(5) and (6) first; and

  (b)   apply subsections   (5) and (6) of this section on the basis that:

  (i)   the amount of the entity's * share of the * franking credit on the distribution had been reduced under subsection   207 - 95(5); and

  (ii)   the amount of the entity's * share of the distribution had been reduced under subsection   207 - 95(6).