• Specific Year
    Any

INCOME TAX ASSESSMENT ACT 1997 - SECT 207.95 Distribution that flows indirectly to an entity

INCOME TAX ASSESSMENT ACT 1997 - SECT 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 not exempt income under section   128D of the Income Tax Assessment Act 1936 .

  X's assessable income of $15 (share of franking credit) is reduced to nil because of the deduction of $15 under subsection   (2). Because of subsection   (1), X is not entitled to a tax offset under section   207 - 45.

Part of share of distribution not assessable

  (5)   If:

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

  (b)   a part of the entity's * share of the distribution (the relevant part ) would, in its hands, be * exempt income or * non - assessable non - exempt income(whether or not it had actually received that part);

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:

Start formula start fraction Relevant part over Entity's *share of the *franked distribution end fraction times Entity's *share of the *franking credit on the *franked distribution apart from this section end formula

  (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 relevant 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:

Start formula Entity's *share of the *franking credit on the *franked distribution apart from this section minus Amount worked out under subsection (5) end formula

Download

No downloadable files available