Early balancers with surplus
With the introduction of the simplified imputation system an early balancing entity will convert its franking account to a tax paid basis on 1 July 2002.
Example: Early balancer - conversion of franking surplus
Quick Ltd is an early balancing company and its 2001-02 income year ends on 31 December 2001.
It continues to maintain its franking account under the former imputation system on 1 January 2002, and has a Class C surplus of $7,000 on 30 June 2002.
Quick Ltd debits its class C franking account with $7,000 on 30 June 2002 to close off the account operating under the former system.
On 1 July 2002 it establishes a new franking account using the tax paid basis. The tax paid amount credited to the new account is calculated using the formula:
$7,000 x (30/70) = $3,000. ($3,000 being available franking credits).
End of example