Holding period rule

The holding period rule was introduced to ensure that only the true economic owners of shares could benefit from franking credits attached to distributions made from those shares.

The holding period rule will apply where the shareholder has not made a related payment in relation to the distribution carrying the franking credit.

The holding period rule requires that the shares be held 'at risk' for at least 45 days (90 days for preference shares) during a defined primary qualification period to be eligible for the franking tax offset.

Financial risk of owning shares may be reduced through arrangements such as hedges, options and futures.

Because of the way the primary qualification period is defined, if a shareholder is a qualified person for a distribution from shares under that rule, they will also be a qualified person for subsequent distributions from those shares.

If a taxpayer is eligible to claim franking credits totalling less than $5,000 and if they have not made a related payment in respect of a distribution, they will automatically be a qualified person and will not have to satisfy the holding period rule.

    Last modified: 09 Jul 2014QC 17505