Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-6 - THE IMPUTATION SYSTEM

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Division 205 - Franking accounts, franking deficit tax liabilities and the related tax offset

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Operative provisions

SECTION 205-30 Franking debits

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205-30(1)

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The following table sets out when a debit arises in the *franking account of an entity and the amount of the debit. The debit is called a franking debit .

Debits in the franking account
Item	If:	A debit of:	Arises:
1	the entity franks a distribution	the amount of the *franking credit on the distribution	on the day on which the distribution is made
2	the entity receives a refund of income tax; and the entity satisfies the residency requirement for the income year to which the refund relates; and the entity was a *franking entity during the whole or part of the income year to which the refund relates	that part of the refund that is attributable to the period during which the entity was a franking entity	on the day on which the refund is received
2A	the entity * receives a * tax offset refund; and the entity does not satisfy the * residency requirement for the income year to which the refund relates; and the entity was a * franking entity during the whole or part of the income year to which the refund relates; and the entity ' s * franking account is in * surplus on the day on which the refund is received	the lesser of: (a) that part of the refund that is attributable to the period during which the entity was a franking entity; and (b) the amount of the * franking surplus	on the day on which the refund is received
3	a franking debit arises for the entity under paragraph 203-50(1)(b) (the entity franks a distribution in contravention of the benchmark rule)	the franking debit worked out under paragraph 203-50(2)(b)	on the day specified in subsection 203-50(4)
4	the entity ceases to be a franking entity; and the entity ' s franking account is in *surplus immediately before ceasing to be a franking entity	the amount of the *franking surplus	on the day on which the entity ceases to be a franking entity
5	a *franking debit arises for the entity under section 204-15 (linked distributions)	the franking debit specified in subsection 204-15(3)	on the day specified in subsection 204-15(4)
6	a franking debit arises under section 204-25 (debit for substituting tax-exempt bonus shares for *franked distributions)	the amount of the debit specified in subsection 204-25(2)	on the day specified in subsection 204-25(3)
7	the Commissioner makes a determination under paragraph 204-30(3)(a) giving rise to a *franking debit for the entity (streaming distributions)	the amount of the debit specified in the determination	on the day specified in section 204-35
7A	a franking debit arises under subsection 197-45(1) because an amount to which Division 197 applies is transferred to a company ' s share capital account	the amount of the debit specified in subsection 197-45(2)	at the time provided by subsection 197-45(1)
7B	a franking debit arises under subsection 197-65(2) because a company chooses to untaint its share capital account	the amount of the debit specified in subsection 197-65(3)	at the time provided by subsection 197-65(2)
8	(Repealed by No 79 of 2007 )
9	(a) the entity purchases a membership interest in itself; and (b) the purchase is an on-market buy-back; and (c) the entity is a company	an amount equal to the debit that would have arisen if: (a) the purchase of the interest were a frankable distribution equal to the one that would have arisen if the entity: (i) purchased the interest off-market; and (ii) in the case of a listed public company - were not a listed public company; and (b) the distribution were franked at the entity ' s benchmark franking percentage for the franking period in which the purchase was made or, if the entity does not have a benchmark franking percentage for the period, at a *franking percentage of 100%	on the day on which the interest is purchased
9A	(a) the entity purchases a membership interest in itself; and (b) the purchase is an off-market buy-back; and (c) the entity is a *listed public company	an amount equal to the debit that would have arisen if: (a) the purchase of the interest were a frankable distribution equal to the one that would have arisen if the entity were not a listed public company; and (b) the distribution were franked at the entity ' s benchmark franking percentage for the franking period in which the purchase was made or, if the entity does not have a benchmark franking percentage for the period, at a *franking percentage of 100%	on the day on which the interest is purchased
9B	the entity makes a *distribution to which paragraph 202-45(k) applies (consideration for cancellation of membership interest as part of selective reduction of capital)	an amount equal to the debit that would have arisen if: (a) the distribution were a frankable distribution equal to the one that would have arisen if the entity were not a listed public company; and (b) the distribution were franked at the entity ' s benchmark franking percentage for the franking period in which the distribution was made or, if the entity does not have a benchmark franking percentage for the period, at a franking percentage of 100%	on the day on which the distribution is made
10	a franking debit arises under section 316-260 for the friendly society or one of its wholly-owned subsidiaries because the franking account of the society or subsidiary is in *surplus	the amount of the debit specified in subsection 316-260(2)	at the time provided by subsection 316-260(3)
11	a franking debit arises under section 316-265 for the friendly society or one of its wholly-owned subsidiaries because a franking credit arises for the society or subsidiary	the amount of the debit specified in subsection 316-265(3)	at the time provided by subsection 316-265(4)
12	a franking debit arises under section 316-270 for the friendly society or one of its wholly-owned subsidiaries because a franking credit arises for the society or subsidiary	the amount of the debit specified in subsection 316-270(3)	at the time provided by subsection 316-270(4)
13	the entity receives a refund of diverted profits tax; and the entity satisfies the residency requirement for the income year to which the refund relates; and the entity was a *franking entity during the whole or part of the income year to which the refund relates	that part of the refund that is attributable to the period during which the entity was a franking entity, multiplied by the proportion worked out under subsection (3)	on the day on which the refund is received

Note:

For completeness, the table refers to some franking debits that arise under other sections of the Act. This does not mean that separate franking debits arise both under the relevant section and this table.

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History

S 205-30(1) amended by No 101 of 2023, s 3 and Sch 4 item 20, by inserting table item 9B, effective 1 January 2024. For application provisions, see note under s 202-45 .

S 205-30(1) amended by No 101 of 2023, s 3 and Sch 4 items 6 - 8, by substituting cell in table item 9, column headed " If: " , para (a) in table item 9, column headed " A debit of: " and inserting table item 9A, effective 1 January 2024. No 101 of 2023, s 3 and Sch 4 item 9 contain the following application provisions:

9 Application of amendments
(1)
The amendments made by this Division apply to a purchase by a listed public company if:
(a) both:

(i) the purchase is announced to the market at or before the time the purchase occurs; and

(ii) the purchase is first announced to the market after 7:30 pm, by legal time in the Australian Capital Territory, on 25 October 2022; or

(b) both:

(i) the purchase is not announced to the market, or the purchase is first announced to the market after the purchase occurs; and

(ii) the purchase occurs after 7:30 pm, by legal time in the Australian Capital Territory, on 25 October 2022.

(2)
The purchase is announced to the market if:
(a) the rules of an approved stock exchange require the company to notify the stock exchange of the purchase for the purpose of release to the market; and
(b) notification of the purchase is released to the market following such disclosure.

The cell in table item 9, column headed " If: " and para (a) in table item 9, column headed " A debit of: " formerly read:

an *on-market buy-back by a company of a *membership interest in the company

(a) the purchase of the interest were a *frankable distribution equal to the one that would have arisen if the company had purchased the interest *off-market; and

S 205-30(1) amended by No 27 of 2017, s 3 and Sch 1 item 19, by inserting table item 13, applicable in relation to DPT tax benefits for a year of income that starts on or after 1 July 2017 (whether or not the DPT tax benefit arises in connection with a scheme that was entered into, or was commenced to be carried out, before 1 July 2017).

S 205-30(1) amended by No 88 of 2013, s 3 and Sch 6 item 59, by inserting table item 2A, effective 29 June 2013.

S 205-30(1) amended by No 88 of 2009, s 3 and Sch 3 item 21, by inserting table items 10, 11 and 12 at the end of the table, applicable in relation to demutualisations occurring on or after 1 July 2008.

S 205-30 amended by No 79 of 2007 , s 3 and Sch 1 item 29, by repealing table item 8, applicable to assessments for the income year in which 1 July 2006 occurred and later income years. Table item 8 formerly read:

8 ... the entity is taken to have paid a dividend for the purposes of the Income Tax Assessment Act 1936 in an income year under Division 7A of Part III of that Act ... an amount equal to the debit that would have arisen if: (a) the dividend that the entity is taken to have paid were a *frankable distribution; and (b) the distribution were *franked at the entity ' s *benchmark franking percentage for the *franking period in which the debit arises or, if the entity does not have a benchmark franking percentage for the period, at a *franking percentage of 100% ... on the last day of the income year.

S 205-30 amended by No 80 of 2006, s 3 and Sch 4 item 5, by inserting table items 7A and 7B, in relation to transfers made into a company ' s share capital account after 25 May 2006.

S 205-30 amended by No 41 of 2005 and inserted by No 48 of 2002.

205-30(2)

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Despite item 2 of the table in subsection (1) , no debit arises on that part of the refund that is attributable to any of the following:

(a)

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a payment of income tax in relation to an *RSA component;

(b) a *tax offset that is subject to the refundable tax offset rules because of section 67-30 (about R & D).

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205-30(3)

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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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