Income Tax Assessment Act 1997
View history note
Hide history noteIf an entity makes a *frankable distribution in breach of the *benchmark rule:
(a) the entity is liable to pay over-franking tax imposed by the New Business Tax System (Over-franking Tax) Act 2002 if the *franking percentage for the *distribution exceeds the entity ' s *benchmark franking percentage for the *franking period in which the distribution is made; and
(b) a *franking debit arises in the entity ' s *franking account if the franking percentage for the distribution is less than the entity ' s benchmark franking percentage for the franking period in which the distribution is made.
203-50(2)
Use the following formula to work out:
(a) in a case dealt with under paragraph (1)(a) - the amount of the *over-franking tax; and
(b) in a case dealt with under paragraph (1)(b) - the amount of the *franking debit:
| Amount of the *frankable distribution | × | Franking % differential | ||
| Applicable gross-up rate |
where:
applicable gross-up rate
means the *corporate tax gross-up rate of the entity making the distribution for the income year in which the distribution is made.
franking % differential
is the difference between:
(a) the *franking percentage for the *frankable distribution; and
(b) either:
(i) if subparagraph (ii) does not apply - the entity ' s *benchmark franking percentage for the *franking period in which the *distribution is made; or
(ii) if the Commissioner in the exercise of the Commissioner ' s powers under subsection 203-55(1) , permits the entity to frank the distribution at a different franking percentage - that percentage.
Example:
An entity makes 3 successive frankable distributions in a franking period. Each of those distributions is represented in the following diagram. The franking percentage for the first distribution is 40%, and so the entity ' s benchmark franking percentage for the period is 40%.
Note:
Distribution 2 is under-franked to the extent of the franking % differential. This is used to work out the amount of the under-franking debit under subsection (2).
Distribution 3 is over-franked to the extent of the franking % differential. This is used to work out the amount of over-franking tax on the distribution under the New Business Tax System (Over-franking Tax) Act 2002 . The amount of the tax is calculated using the same formula as that set out in subsection (2).
203-50(3)
A *franking debit arising under paragraph (1)(b) is in addition to any franking debit that would otherwise arise for the entity because of the *distribution.
203-50(4)
The *franking debit arises on the day on which the *frankable distribution is made.
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