Income Tax Assessment Act 1997
The following table sets out when a debit arises in the *franking account of an entity because of its status as an *exempting entity or *former exempting entity.
|Franking debits arising because of status as an exempting entity or former exempting entity|
|Item||If:||A debit of:||Arises:|
|1||an entity becomes a *former exempting entity; and
the entity has a *franking surplus at the time it becomes a former exempting entity
|the amount of the franking surplus||immediately after the entity becomes a former exempting entity|
|2||the *exempting account of a *former exempting entity would, apart from item 7 of the table in section 208-115, be in *deficit immediately before the end of an income year||an amount equal to the deficit||immediately before the end of the income year|
|3||an *exempting credit arises in the *exempting account of the entity under item 5, 6 or 9 of the table in section 208-115||an amount equal to the exempting credit||when the exempting credit arises|
|4||a *former exempting entity becomes an *exempting entity; and
the entity has an *exempting deficit at the time it becomes an *exempting entity
|an amount equal to the exempting deficit||immediately after it becomes an exempting entity|
|5||a *franking credit arises in the *franking account of an entity under item 3 or 4 of the table in section 205-15 because a *distribution is made by an *exempting entity to the entity, or a distribution made by an exempting entity *flows indirectly to the entity||an amount equal to the amount of the franking credit||when the franking credit arises|
Item 3 of the table is designed to reverse out franking credits that arise in relation to a period during which the entity is an exempting entity. The entity will receive an exempting credit instead.
Item 5 of the table is designed to reverse out franking credits that arise under the core rules because an entity receives a franked distribution from an exempting entity. Only a recipient who is itself an exempting entity is entitled to a franking credit in these circumstances.