(1) This section applies if:
(a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and
(b) the company's assessment day (the assessment day ) for that income year occurs on or after 1 July 2002; and
(c) the company has a franking account (the new franking account ) under section 205-10 of the Income Tax Assessment Act 1997 .
(2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day:
amount of the 1936 Act credit means the amount of the franking credit mentioned in paragraph (1)(a).
(3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219-15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002.
Note: On the assessment day, the franking credit mentioned in paragraph (1)(a) is therefore:
* reversed by the franking debit arising under subsection (2); and
* replaced with a franking credit arising under subsection (3).