Income Tax Assessment Act 1997
CHAPTER 3
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SPECIALIST LIABILITY RULES
PART 3-6
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THE IMPUTATION SYSTEM
Division 205
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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 .
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:
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.
Step 2.
Step 3.
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%.
View history note
Hide history noteThe 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) |
| 4A | a *franking debit arises under item 2 or 2A of the table in subsection
205-30(1)
because the entity receives a *tax offset refund; and
the entity ' s tax offset refund is subsequently reduced and the entity is liable to pay to the Commonwealth the amount of the excess mentioned in subsection 172A(2) of the Income Tax Assessment Act 1936 ; and the entity pays the amount of the excess |
the difference (if any) between:
(a) the amount of the franking debit; and (b) the amount the franking debit would have been if the tax offset refund were reduced by the amount of the excess |
on the day on which the amount of the excess is paid |
| 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
(b) during which the *franked distribution *flows indirectly to the entity.
(ii) the *corporate tax entity that made the distribution; and
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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