Income Tax Assessment Act 1997
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Hide history noteSECTION 207-95 Distribution that flows indirectly to an entity
Whole of share of distribution not assessable
207-95(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
207-95(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
207-95(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
207-95(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
207-95(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:
|
Relevant part
Entity ' s *share of the *franked distribution |
× | Entity
'
s *share
of the *franking credit on the *franked distribution apart from this section |
207-95(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:
| Entity
'
s *share of
the *franking credit on the *franked distribution apart from this section |
− | Amount worked out
under subsection (5) |
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