Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 207 - Effect of receiving a franked distribution  

Subdivision 207-E - Exceptions to the rules in Subdivision 207-D  

Exempt institutions

SECTION 207-120   Entity may be ineligible because of a distribution event  

207-120(1)    
This section applies to an entity (the ineligible entity ) if:

(a) a *franked distribution is made, or *flows indirectly under subsection 207-50(3) or (4) , to the entity; and

(b) subsection (2) of this section applies because of a *distribution event in relation to the distribution.

207-120(2)    
Subject to subsection (3) and to section 207-128 , this subsection applies if, because of a *distribution event in relation to the *franked distribution:

(a) the ineligible entity or another entity:

(i) makes, becomes liable to make, or may reasonably be expected to make or to become liable to make, a payment to any entity; or

(ii) transfers, becomes liable to transfer, or may reasonably be expected to transfer or to become liable to transfer, any property to any entity; or

(iii) incurs, becomes liable to incur, or may reasonably be expected to incur or to become liable to incur, any other detriment, disadvantage, liability or obligation; or

(b) if the distribution is made to the ineligible entity - the amount or value of the benefit *derived by the ineligible entity from the distribution is, will be, or may reasonably be expected to be, less than the amount or value of the distribution as at the time the distribution is made; or

(c) if the distribution *flows indirectly to the ineligible entity - the amount or value of the benefit derived by the ineligible entity from the ineligible entity ' s *trust share amount in relation to the distribution is, will be, or may reasonably be expected to be, less than the amount or value of the ineligible entity ' s trust share amount in relation to the distribution as at the time when that amount arises; or

(d) any of the following entities has obtained, will obtain or may reasonably be expected to obtain, a benefit, advantage, right or privilege:

(i) the entity making the distribution;

(ii) an entity through which the distribution flows indirectly to the ineligible entity;

(iii) an *associate of any of those entities.

Note:

For when paragraph (d) is satisfied, see also subsection 207-132(2) .

Exception to paragraph (2)(b) or (c)

207-120(3)    
Paragraph (2)(b) or (c) does not apply if:

(a) that paragraph would otherwise apply only because of expenses the ineligible entity has incurred, will incur, or may reasonably be expected to incur, for the purpose of obtaining the *franked distribution or *trust share amount mentioned in that paragraph; and

(b) the Commissioner considers the expenses to be reasonable.

Trust share amount

207-120(4)    
An entity ' s trust share amount in relation to a *franked distribution that *flows indirectly to the entity under subsection 207-50(3) or (4) is the entity ' s share amount that is mentioned in that subsection.

Distribution event

207-120(5)    
A distribution event in relation to a *franked distribution is an act, transaction or circumstance that has happened, will happen, or may reasonably be expected to happen, as part of, in relation to or as a result of:

(a) the payment or receipt of the distribution; or

(b) if the distribution *flows indirectly to an entity under subsection 207-50(3) or (4) - the arising of, or the distribution or receipt of, the entity ' s *trust share amount in relation to the distribution; or

(c) an *arrangement entered into in association with a matter mentioned in paragraph (a) or (b).