Late balancers with surplus

Under the former provisions a late balancing entity generally had a franking year ending on 30 June 2002. This is the same franking year as ordinary balancing entities.

Late balancing entities convert their franking account to the tax paid basis under the same provisions as ordinary balancers.

The former provisions, section 160APL of the ITAA (1936) generally provided for any surplus at the end of a franking year to create an equivalent opening credit in the franking account at the start of the next franking year.

Under the simplified imputation system, no credit arises under section 160APL of the ITAA 1936 for normal balancing entities with a surplus in the franking account on 30 June 2002.

Instead, a credit arises under the transitional provisions to convert any surplus to a tax paid amount.

Example: Late balancer - conversion of franking surplus

Slew and Shaw Ltd is a late balancing company.

Its 2001-02 income year ends on 30 September 2002. Under the former provisions where the income and franking years were not aligned, Slew and Shaw's 2001-02 franking year ends on 30 June 2002.

On 30 June 2002, Slew and Shaw has a surplus in its class C franking account of $7,000.

The transitional provisions convert the surplus to an opening credit in the tax paid franking account on 1 July 2002 using the formula:

$7,000 x (30/70) = $3,000

End of example
    Last modified: 09 Jul 2014QC 17505