INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 207 - Effect of receiving a franked distribution  

Subdivision 207-B - Franked distribution received through certain partnerships and trustees  

Key concepts

SECTION 207-55   Share of a franked distribution  

Object of section

207-55(1)  
The object of this section is to ensure that:


(a) the amount of a *franked distribution made to a partnership or the trustee of a trust is allocated notionally amongst entities who *derive benefits from that distribution; and


(b) that allocation corresponds with the way in which those benefits were derived.

Note:

An entity can derive a benefit from the distribution (and therefore has a share of the distribution) without actually receiving any of the distribution: see subsection (2) of this section and the example at the end of section 207-50 .

207-55(2)  
An entity's share of a *franked distribution is an amount notionally allocated to the entity as its share of the distribution, whether or not the entity actually receives any of that distribution.

207-55(3)  


That amount is equal to the entity's share of the distribution as the focal entity in column 3 of an item of the table.
Note:

An entity's share of the distribution is based on the share of the distribution of each preceding intermediary entity through which the distribution flows, starting from the intermediary entity to whom the distribution is made.

This means that in some cases (see items 2 and 4), more than one item of the table will need to be applied to work out the share of the distribution of an ultimate recipient of the distribution.


Share of a franked distribution
Item Column 1

For this intermediary entity and this focal entity:
Column 2

The intermediary entity's share of the franked distribution is:
Column 3

The focal entity's share of the franked distribution is:
1 a partnership is the intermediary entity and a partner in that partnership is the focal entity if:

(a) a *franked distribution is made to the partnership; and

(b) the partner has, in respect of the partnership, an individual interest mentioned in subsection 207-50(2)
the amount of the franked distribution so much of the franked distribution as is taken into account in working out the amount of that individual interest
2 a partnership is the intermediary entity and a partner in that partnership is the focal entity if:

(a) a *franked distribution *flows indirectly to the partnership as a beneficiary of a trust; and

(b) the partner has, in respect of the partnership, an individual interest mentioned in subsection 207-50(2)
the amount worked out under column 3 of item 3 or 4 of this table where the partnership, as a beneficiary, is the focal entity in that item so much of the amount worked out under column 2 of this item as is attributable to the partner, having regard to the partnership agreement and any other relevant circumstances
3 the trustee of a trust is the intermediary entity and the trustee or a beneficiary of the trust is the focal entity if:

(a) a *franked distribution is made to the trustee; and

(b) the trustee or beneficiary has, in respect of the trust, a share amount mentioned in subsection 207-50(3) or (4)
(a) if the trust has a positive amount of *net income for that year - the amount of the franked distribution; or

(b) otherwise - nil
the amount mentioned in subsection (4)
4 the trustee of a trust is the intermediary entity and the trustee or a beneficiary of the trust is the focal entity if:

(a) a *franked distribution *flows indirectly to the trustee as a partner in a partnership or as a beneficiary of another trust; and

(b) the trustee or beneficiary has, in respect of the trust, a share amount mentioned in subsection 207-50(3) or (4)
the amount worked out under column 3 of:

(a) item 1 or 2 of this table where the trustee, as a partner, is the focal entity in that item; or

(b) item 3 or a previous application of this item where the trustee, as a beneficiary, is the focal entity in that item
so much of the amount worked out under column 2 of this item as is attributable to the focal entity in this item, having regard to the trust deed and any other relevant circumstances

Note:

In item 3 or 4, the trustee of a trust can be both the intermediary entity and the focal entity in the same item.

207-55(4)  


For the purposes of column 3 of item 3 of the table in subsection (3), the amount is the sum of:


(a) so much of the amount worked out under column 2 of item 3 of the table in subsection (3) to which:


(i) unless subparagraph (ii) applies - the focal entity is *specifically entitled; or

(ii) if the focal entity is the trustee and has the share amount because of the operation of section 98 of the Income Tax Assessment Act 1936 in respect of a beneficiary (see subparagraph 207-50(4)(b)(i) ) - the beneficiary is specifically entitled; and


(b) if there is an amount of the *franked distribution to which no beneficiary is specifically entitled - that amount multiplied by:


(i) unless subparagraph (ii) applies - the focal entity ' s *adjusted Division 6 percentage of the income of the trust for the relevant income year; or

(ii) if the focal entity is the trustee and has the share amount because of the operation of section 98 of the Income Tax Assessment Act 1936 in respect of a beneficiary (see subparagraph 207-50(4)(b)(i) ) - the beneficiary ' s adjusted Division 6 percentage of the income of the trust for the relevant income year.

 

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