Franking debit arises if tax-exempt bonus shares are issued in substitution for a franked distribution
(1) This section gives rise to a * franking debit in an entity's * franking account if:
(a) the exercise of a choice or selection by a * member of the entity; or
(b) the member's failure to exercise a choice or selection;
has the effect of determining (to any extent) that the entity issues one or more * tax-exempt bonus shares, to that member or another member of the entity, in substitution (in whole or in part) for one or more * franked distributions by the entity to that member or another member.
Amount of the debit
(2) The debit is equal to the one that would arise in the entity's * franking account if the entity made a * distribution, equal to the * franked distributions referred to in subsection (1), franked at the entity's * benchmark franking percentage for the * franking period in which the shares are issued.
When does the debit arise
(3) The debit arises on the day when the shares are issued.
Meaning of tax-exempt bonus share
(4) For a company whose * shares have no par value, tax-exempt bonus share means a share issued by the company in the circumstances mentioned in subsection 6BA(6) of the Income Tax Assessment Act 1936 .
(5) For any other company, tax-exempt bonus share means a * share issued by the company to a * shareholder in the company where:
(a) the amount or value of the share is debited against an amount standing to the credit of a share premium account of the company; and
(b) no part of the paid-up value of the share is a dividend; and
(c) the share is issued:
(i) as a bonus share; or
(ii) in the circumstances mentioned in subsection 6BA(1) of the Income Tax Assessment Act 1936 , as in force immediately before 1 July 1998.
Where a company has no benchmark franking percentage for the franking period
(6) If a company has no * benchmark franking percentage for the * franking period in which the * tax-exempt bonus share is issued, this section applies as if the entity had a benchmark franking percentage of 100% for that period.
Guide to Subdivision 204-D