Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 205 - Franking accounts, franking deficit tax liabilities and the related tax offset  

Operative provisions  

SECTION 205-15   Franking credits  

205-15(1)  


The following table sets out when a credit arises in the *franking account of an entity and the amount of the credit. The credit is called a franking credit .


Credits in the franking account
Item If: A credit of: Arises:
1 the entity *pays a PAYG instalment; and
the entity satisfies the *residency requirement for the income year in relation to which the PAYG instalment is paid; and
the entity is a *franking entity for the whole or part of the relevant *PAYG instalment period
that part of the payment that is attributable to the period during which the entity was a franking entity, less any reduction under subsection (4) on the day on which the payment is made
2 the entity *pays income tax; and
the entity satisfies the *residency requirement for the income year for which the tax is paid; and
the entity is a *franking entity for the whole or part of that income year
that part of the payment that is attributable to the period during which the entity was a franking entity, less any reduction under subsection (4) on the day on which the payment is made
3 a *franked distribution is made to the entity; and
the entity satisfies the *residency requirement for the income year in which the distribution is made; and
the entity is a *franking entity when it receives the distribution; and
the entity is entitled to a *tax offset because of the distribution under Division 207
the *franking credit on the distribution on the day on which the distribution is made
4 a *franked distribution *flows indirectly to the entity through a partnership or the trustee of a trust; and
the entity is a *franking entity when the franked distribution is made; and
the entity is entitled to a *tax offset because of the distribution under Division 207
the entity ' s share of the *franking credit on the distribution at the time specified in subsection (2)
5 the entity incurs a liability to pay *franking deficit tax under section 205-45 or 205-50 the amount of the liability immediately after the liability is incurred
6 a *franking credit arises under section 316-275 for the *friendly society or one of its *wholly-owned subsidiaries because the society or subsidiary *receives a refund of income tax the amount of the debit specified in subsection 316-275(3) at the time provided by subsection 316-275(4)
6A a *franking credit arises under paragraph 417-50(5)(b) in relation to a deduction transferred to a *corporate tax entity the amount of the *franking credit specified in subsection 417-50(6) at the time provided by paragraph 417-50(5)(b)
6B a *franking credit arises under paragraph 417-100(1)(c) in relation to *tax loss transferred to a *corporate tax entity the amount of the *franking credit specified in subsection 417-100(3) at the time provided by paragraph 417-100(1)(c)
7 a *franking credit arises under subsection 418-50(1) in relation to an *exploration credit the amount of the *franking credit specified in subsection 418-50(2) at the time provided by subsection 418-50(3)
8 the entity *pays diverted profits tax; and
the entity satisfies the *residency requirement for the income year for which the tax is paid; and
the entity is a *franking entity for the whole or part of that income year
that part of the payment that is attributable to the period during which the entity was a franking entity, multiplied by the proportion worked out under subsection (5) on the day on which the payment is made

205-15(2)  


A *franking credit covered by item 4 of the table arises at the end of the income year:


(a) that is an income year of the last partnership or trust interposed between:


(i) the entity; and

(ii) the *corporate tax entity that made the distribution; and


(b) during which the *franked distribution *flows indirectly to the entity.

205-15(3)  


Despite item 1 or 2 of the table in subsection (1), no credit arises on that part of the payment that is attributable to a payment of income tax in relation to an *RSA component.

205-15(4)  


An entity ' s *franking credit for a payment mentioned in item 1 or 2 of the table in subsection (1) is reduced by the amount (if any) worked out as follows, but not below zero. Method statement

Step 1.

Identify any income years ending before the payment was made for which the entity has *received a refund of income tax.


Step 2.

Add up the part (if any) of each of those refunds that is attributable to a *tax offset that is subject to the refundable tax offset rules because of section 67-30 (about R & D).


Step 3.

Subtract any reduction under this subsection of a *franking credit for any earlier payment by the entity. (For this purpose, assume a credit reduced to zero is still a franking credit.)

205-15(5)  


The proportion is the standard corporate tax rate (within the meaning of Part IVA of the Income Tax Assessment Act 1936) divided by 40%.

 

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