Income Tax Assessment Act 1997
If a corporate tax entity makes a franked distribution to one of its members, then, as a general rule:
(a) an amount equal to the franking credit on the distribution is included in the member ' s assessable income; and
(b) the member is entitled to a tax offset equal to the same amount. 207-5(2)
In some cases a residency requirement must be satisfied for the general rule to apply. 207-5(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).
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.
That share is a notional amount and the entity can have that share without actually receiving any of that franking credit or distribution.
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 ).
Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited
CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.
The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.