INCOME TAX ASSESSMENT ACT 1997 - SECT 207.50 When a franked distribution flows indirectly to or through an entity

INCOME TAX ASSESSMENT ACT 1997 - SECT 207.50

  (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, and only if:

  (a)   during that income year, the distribution is made to the trustee of the trust, or * flows indirectly to the trustee as a partner or beneficiary because of a previous application of subsection   (2) or this subsection; and

  (b)   the beneficiary has this amount for that income year (the share amount ):

  (i)   a share of the trust's * net income for that income year that is covered by paragraph   97(1)(a) of the Income Tax Assessment Act 1936 ; or

  (ii)   an individual interest in the trust's net income for that income year that is covered by section   98A or 100 of that Act;

    (whether or not the share amount becomes assessable income in the hands of the beneficiary); and

  (c)   the beneficiary's * share of the distribution under section   207 - 55 is a positive amount (whether or not the beneficiary actually receives any of that share).

Trustees

  (4)   A * franked distribution flows indirectly to the trustee of a trust in an income year if, and only if:

  (a)   during that income year, the distribution is made to the trustee, or * flows indirectly to the trustee as a partner or beneficiary because of a previous application of subsection   (2) or (3); and

  (b)   the trustee is liable or, but for another provision in this Act, would be liable, to be assessed in respect of an amount (the share amount ) that is:

  (i)   a share of the trust's * net income for that income year under section   98 of the Income Tax Assessment Act 1936 ; or

  (ii)   all or a part of the trust's net income for that income year under section   99 or 99A of that Act;

    (whether or not the share amount becomes assessable income in the hands of the trustee); and

  (c)   the trustee's * share of the distribution under section   207 - 55 is a positive amount (whether or not the trustee actually receives any of that share).

Note:   A trustee to whom a franked distribution flows indirectly under this subsection is entitled to a tax offset under section   207 - 45 and the distribution does not flow indirectly through the trustee to another entity.

  (5)   A * franked distribution flows indirectly through an entity (the first entity ) to another entity if, and only if:

  (a)   the other entity is the focal entity in an item of the table in section   207 - 55 in relation to the distribution; and

  (b)   that focal entity's * share of the distribution is based on the first entity's share of the distribution as an intermediary entity in that or another item of the table.

Example:   A franked distribution of $140 is made to a partnership. An amount equal to the franking credit on the distribution ($60) is included in the partnership's assessable income under section   207 - 35. Because the partnership has losses of $300 from other sources, it has a partnership loss of $100 for the income year.

  The partnership has 2 equal partners. One partner is the trustee of a trust and the other partner is an individual. The distribution flows indirectly to each partner under subsection   (2). Each partner has a share of the partnership loss ($50), a share of the distribution under sections   207 - 55 ($70) and a share of the franking credit under section   207 - 57 ($30).

  The individual partner is allowed a tax offset of $30 under section   207 - 45.

  Because the trust has $100 of income from other sources, it has a net income of $50 for that income year ($100 minus the share of the partnership loss of $50).

  The trust has one individual as a beneficiary, to whom the distribution flows indirectly under subsection   (3). The beneficiary's share of the franked distribution is therefore $70 under sections   207 - 55 and its share of the franking credit is $30 under section   207 - 57. The beneficiary is also allowed a tax offset of $30 under section   207 - 45.