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12 Dec 13 Franking credit where franked dividend paid to trust member of consolidated group - TD 2013/D10

On 11 December 2013, the ATO released for public comment by 24 January 2014 draft Taxation Determination TD 2013/D10 entitled "Income tax: does a franking credit arise in the franking account of a head company of a consolidated group when a franked distribution is made by an entity that is not a member of the consolidated group to a trust that is a subsidiary member of the consolidated group?"

The answer given to the question posed is as follows:

"Yes. Provided the head company is entitled to a tax offset under Division 207 of the Income Tax Assessment Act 1997 (ITAA 1997)1 because of the franked distribution, a franking credit will arise in the head company's franking account on the day on which the distribution is made."

The draft also states:

"Note that this draft Determination does not apply where the head company is a life insurance company (as defined in s 995-1(1)), or is treated as if it were a life insurance company by s 713-505, and:

  • the head company is a mutual insurance company as defined in s 121AB of ITAA 1936, or
  • the tax offset under Division 207 to which the head company is entitled because of the franked distribution is subject to the refundable tax offset rules in Division 67."

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