Franking periods where the income year straddles 1 July 2002
In some instances, an early balancing or late balancing corporate tax entity will have a franking period that straddles 1 July 2002. To ensure that the simplified imputation rules, which apply from 1 July 2002, operate as intended, a transitional rule is required to ensure that a franking period cannot start earlier than 1 July 2002.
To achieve this, the early balancing or late balancing corporate tax entity will:
- first work out its franking periods under the general rules, and
- if the franking period straddles 1 July 2002, the transitional rule will apply so that the franking period will begin on 1 July 2002 and end when it would otherwise have ended.
As the simplified imputation rules commenced from 1 July 2002, then necessarily, the rules will not apply to any franking period that commenced prior to 1 July 2002.
Example: Early balancing public company
Oates Inc is a public company whose 2002-03 income year ends on 31 March 2003, which makes it an early balancing company.
Using the general franking period rules, Oates Inc would find that its franking periods would be:
- 1st franking period: 1 April 2002 to 30 September 2002, and
- 2nd franking period: 1 October 2002 to 31 March 2003.
However, using the transitional rules, Oates Inc will establish that because its first franking period straddles 1 July 2002, it will be taken to commence on 1 July 2002. Consequently, Oates Inc's franking periods for the purposes of the simplified imputation system will be:
End of example
- 1st franking period: 1 July 2002 to 30 September 2002, and
- 2nd franking period: 1 October 2002 to 31 March 2003
Example: Early balancing private company
Do Supplies Pty Ltd is a private company whose 2002-03 income year ends on 31 December 2002 in lieu of 30 June 2003, making it an early balancing company.
Using the general franking period rule, Do Supplies Ltd would find that its franking period would be the 12 month period:
1 January 2002 to 31 December 2002
However, because this franking period straddles 1 July 2002, Do Supplies Pty Ltd would apply the transitional rules so that its franking period will be taken to be:
1 July 2002 to 31 December 2002
The simplified imputation rules will not apply to that part of the franking period that arose prior to 1 July 2002.
End of example