Income Tax Assessment Act 1997
An exempting entity is a corporate tax entity that is effectively owned by entities that, either because they are not Australian residents or because they receive distributions as exempt income or non-assessable non-exempt income, would not be able to fully utilise franking credits on distributions by the corporate tax entity.
In deciding whether a corporate tax entity is effectively owned by such entities, these rules:
(a) look at the membership interests in the entity that involve the holder of the interest in bearing the risks and accruing the opportunities of ownership of the entity; and
(b) ask whether at least 95% of those membership interests, and 95% of any interests in those membership interests, are held by Australian residents or entities that receive distributions as exempt income or non-assessable non-exempt income.
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