Tax Laws Amendment (2004 Measures No. 2) Act 2004 (83 of 2004)

Schedule 10   Franked distributions received through certain partnerships and trustees

Part 2   Amendments commencing on 29 June 2002

Income Tax Assessment Act 1997

5   Subsections 207-5(3), (4) and (5)

Repeal the subsections, substitute:

(3) If a franked distribution is made to a member that is a partnership or the trustee of a trust, an amount equal to the franking credit on the distribution is also included in the member's assessable income as mentioned in paragraph (1)(a).

(4) However, a tax offset in relation to that distribution is only available to an entity (who may be a partner, beneficiary or a trustee) if the distribution flows indirectly to it and does not flow indirectly through it to another entity. The tax offset is equal to its share of the franking credit on the distribution.

Note: That share is a notional amount and the entity can have that share without actually receiving any of that franking credit or distribution.

(5) There are exceptions to both the general rule mentioned in subsection (1) and the special rule mentioned in subsection (4). Basically, these exceptions are created:

(a) where the relevant entity would not have paid tax on the distribution or a share of the distribution (see Subdivisions 207-D and 207-E); and

(b) where there is a manipulation of the imputation system in a manner that is not permitted under the income tax law (see Subdivision 207-F).