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Applying Subdiv 207-B and Div 6 to franked distributions

Published on 01 Sep 19 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

This article considers the application of Div 6 of the Income Tax Assessment Act 1936 (Cth) (ITAA36), Div 6E ITAA36 and Subdiv 207-B of the Income Tax Assessment Act 1997 (Cth) in circumstances where a trust receives a franked distribution that is completely extinguished by directly relevant expenses. This article illustrates the level of detailed analysis that must be undertaken when working through these rules, even in simple factual scenarios. The overall result is straightforward in that the beneficiary includes the franking credit gross up in assessable income and is entitled to a franking credit tax offset for the same amount. However, the actual process involved in reaching this conclusion involves reconstructing the trust law, taxable income and present entitlement position under Div 6E, as well as for the adjusted Division 6 percentage. Undertaking a methodical approach may assist practitioners when dealing with these rules in similar factual scenarios.

Author profile

Norman Hanna
Hanna is a Sessional Lecturer in Tax Law Griffith University. - Current at 11 September 2019

 

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