Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-6 - THE IMPUTATION SYSTEM  

Division 208 - Exempting entities and former exempting entities  

Subdivision 208-F - Exempting accounts and franking accounts of exempting entities and former exempting entities  

Operative provisions

SECTION 208-155   Eligible continuing substantial member  

208-155(1)    
A *member of a *former exempting entity is an eligible continuing substantial member in relation to a *distribution made by the entity if the following provisions apply.

208-155(2)    
At both the time when the *distribution was made, and the time immediately before the entity ceased to be an *exempting entity, the *member was entitled to not less than 5% of:

(a) where the entity is a company:

(i) if the voting shares (as defined in the Corporations Act 2001 ) in the relevant former exempting entity are not divided into classes - those voting shares; or

(ii) if the voting shares (as so defined) in the relevant former exempting entity are divided into 2 or more classes - the shares in one of those classes; and

(b) where the entity is a *public trading trust - the units in the trust; and

(c) where the entity is a *corporate limited partnership - the income of the partnership.

208-155(3)    
At both the time when the *distribution was made, and the time immediately before the entity ceased to be an *exempting entity, the *member was a person referred to in one or more of the following paragraphs:

(a) a person who is a foreign resident;

(b) a *life insurance company;

(c) an exempting entity;

(d) a *former exempting entity;

(e) a trustee of a trust in which an interest was held by a person referred to in any of paragraphs (a) to (d);

(f) a partnership in which an interest was held by a person referred to in any of paragraphs (a) to (d).

208-155(4)    

If the assumptions set out in subsection (5) are made:

(a) if the *member was a person referred to in any of paragraphs (3)(a) to (d) - the member; or

(b) if the member was a trustee of a trust or a partnership, being a trust or partnership in which a person referred to in any of those paragraphs held an interest - the holder of the interest;

would (if a foreign resident) be exempt from *withholding tax on the distribution or (if an Australian resident) be entitled to a *franking credit or a *tax offset in respect of the distribution.

208-155(5)    
The assumptions referred to in subsection (4) are that:

(a) the relevant former exempting entity was an *exempting entity at the time it made the *distribution; and

(b) the distribution was a *franked distribution made to the member; and

(c) if the *member was a *former exempting entity - the member was an exempting entity; and

(d) if the member was a trustee of a trust or partnership in which a former exempting entity had an interest - the former exempting entity was an exempting entity.

208-155(6)    
A person is taken to hold an interest in a trust, for the purposes of paragraph (3)(e), if:

(a) the person is a beneficiary under the trust; or

(b) the person *derives, or will derive, income indirectly, through interposed trusts or partnerships, from *distributions received by the trustee.

208-155(7)    

A person is taken to hold an interest in a partnership, for the purposes of paragraph (3)(f), if:

(a) the person is a partner in the partnership; or

(b) the person *derives, or will derive, income indirectly, through interposed trusts or partnerships, from *distributions received by the partnership.