Refunding imputation credits - Trustees

What dividends does the refund apply to?

The refund applies to the imputation credits attached to franked dividends paid on or after 1 July 2000. Franked dividends are payments made out of profits by an Australian resident company to its shareholders that carry 'imputation credits'.

When trustees of resident trust estates are liable to be assessed under section 99 of the ITAA 1936 and their part of the net income of the trust upon which they are liable to be assessed includes franked dividends, they are also required to include the imputation credits on those franked dividends in their assessable income. Subject to the anti-avoidance rules, trustees can then claim the imputation credits as a tax offset. The tax offset will reduce their tax liability for the income year from all forms of income, not just from dividend income.

Prior to 1 July 2000, the tax offset could not create a refund. If trustees had any excess imputation credits available after their basic income tax liability had been reduced to nil, the imputation credits were disregarded and could not be refunded. However, for dividends paid on or after 1 July 2000 excess imputation credits will be refunded to eligible trustees.