If a corporate tax entity:
- receives a refund within three months of the end of its income year in relation to the 12 month period ending at the end of the entity's previous income year, and
- if that refund had been received in that prior income year the franking account of the entity would have been in deficit, or in deficit to a greater extent
the refund will be taken as received immediately before the end of the entity's income year. As a result, the corporate tax entity may need to recalculate its FDT liability. This rule ensures that the entity does not avoid FDT by deferring the time at which a franking debit would occur in its franking account.
Most corporate tax entities have a franking year that is the same as their income year; however, some late balancing entities may still have a franking year that ends on 30 June. For these entities the above rule applies to refunds received within three months of 30 June rather than within three months of the end of their income year.