Commonwealth of Australia Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 207.145

Whole of distribution manipulated

             (1)  If a * franked distribution is made to an entity in one or more of the following circumstances:

                     (a)  the entity is not a qualified person in relation to the distribution for the purposes of Division 1A of former Part IIIAA of the Income Tax Assessment Act 1936 ;

                     (b)  the Commissioner has made a determination under paragraph 177EA(5)(b) of that Act that no imputation benefit (within the meaning of that section) is to arise in respect of the distribution for the entity;

                     (c)  the Commissioner has made a determination under paragraph 204-30(3)(c) of this Act that no * imputation benefit is to arise in respect of the distribution for the entity;

                     (d)  the distribution is made as part of a * dividend stripping operation;

then, for the purposes of this Act:

                     (e)  the amount of the * franking credit on the distribution is not included in the assessable income of the entity under section 207-20 or 207-35; and

                      (f)  the entity is not entitled to a * tax offset under this Subdivision because of the distribution; and

                     (g)  if the distribution * flows indirectly through the entity to another entity--subsection 207-35(3) and section 207- 45 do not apply to that other entity.

Part of share of distribution manipulated

             (2)  If:

                     (a)  a * franked distribution is made to an entity; and

                     (b)  the Commissioner makes a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise in respect of a specified part of the distribution (the specified part ) for the entity;

then, for the purposes of this Act:

                     (c)  the amount of the distribution is taken to have been reduced by the specified part; and

                     (d)  the amount of the * franking credit on the distribution is to be worked out as follows:

Example:    A franked distribution of $70 is made to the trustee of a trust. Apart from this section, the franking credit on the distribution ($30) would be included in the assessable income of the trust under section 207-35.

                   The Commissioner has made a determination under paragraph 177EA(5)(b) of the Income Tax Assessment Act 1936 that no imputation benefit (within the meaning of that section) is to arise for the trustee in respect of $49 of the distribution.

                   Under this subsection, the amount included in the assessable income of the trust under section 207-35 because of the distribution is reduced from $30 to $9.

                   If there is a beneficiary of the trust that is presently entitled to the trust's income, the amount of the distribution that flows indirectly to the beneficiary is reduced from $70 to $21 under this subsection.

What happens if both subsection 207- 90(2) and subsection (2) of this section would apply

             (3)  If, apart from this subsection, both subsection 207- 90(2) and subsection (2) of this section would apply to an entity in relation to a * franked distribution, then:

                     (a)  apply subsection 207- 90(2) first; and

                     (b)  apply subsection (2) of this section on the basis that the amount of the * franked distribution had been reduced under subsection 207- 90(2).