Franking debit arises where a distribution by one entity is substituted for a distribution by another
(1) This section gives rise to a * franking debit if:
(a) the exercise of a choice or selection by a * member of an entity (the first entity ); or
(b) the member's failure to exercise a choice or selection;
has the effect of determining (to any extent) that another entity makes to one of its members a * distribution (the linked distribution ) that is:
(c) in substitution (in whole or in part) for a distribution by the first entity to that member or any other member of the first entity; and
(d) unfranked, or * franked at a * franking percentage that differs from the first entity's * benchmark franking percentage for the * franking period in which the linked distribution is made.
Note: Division 205 deals with a corporate tax entity's franking account and sets out when a debit, known as a franking debit, arises in that account.
Franking account in which the debit arises
(2) The debit arises in the * franking account of the entity with the higher * benchmark franking percentage for the * franking period in which the linked distribution is made.
Amount of the debit
(3) The debit is equal to the one that would arise in that * franking account if the entity had made a * franked distribution, equal to the linked distribution, with a * franking percentage equal to the * benchmark franking percentage for that entity.
When does the debit arise
(4) The debit arises on the day on which the linked distribution is made.
Debit is in addition to any other franking debit arising because of the linked distribution
(5) The debit is in addition to any other debit that arises in an entity's * franking account because of the linked distribution.
Where an entity has no benchmark franking percentage
(6) If an entity has no * benchmark franking percentage for the * franking period in which the linked distribution is made, this section applies as if:
(a) in a case where the linked distribution has a * franking percentage of less than 50%--the entity had a benchmark franking percentage of 100% for that period; and
(b) in a case where the linked distribution has a franking percentage equal to or greater than 50%--the entity had a benchmark franking percentage of 0% for that period.
Guide to Subdivision 204-C