Setting the benchmark percentage
The benchmark franking percentage for the franking period will be the franking percentage allocated to the first frankable distribution made by the entity within the period.
All distributions within the period must be franked to the same percentage.
If no frankable distributions are made in the franking period the entity does not have a benchmark franking percentage for the period.
If the entity distributes frankable distributions and decided not to frank them, then the benchmark percentage is zero.
If the distribution was a deemed dividend made by a private company by way of a loan there would not be a frankable distribution, and therefore no benchmark percentage would be established.
Example: Setting the benchmark franking percentage
Dawn Enterprise has made three distributions within the current franking period and will be making a fourth distribution also in the current franking period:
- the first distribution was a distribution that is an unfrankable distribution
- the second distribution was a frankable distribution but the distribution was not franked, and
- the third distribution was a distribution that is an unfrankable distribution.
The second distribution was the first frankable distribution that set the benchmark franking percentage for Dawn Enterprise for the franking period.
The benchmark franking percentage that is set for Dawn Enterprise is 0% because the frankable distribution was not franked.
The benchmark rule requires that Dawn Enterprises make its fourth distribution franked at 0%.
End of example