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
    Last modified: 09 Jul 2014QC 17505