A private company is permitted to provide a distribution statement within four months (or such further time allowed by the Commissioner) after the end of the income year in which the distribution is made. This means that a private company can retrospectively decide what franking credit to allocate, some time after the distribution is paid.
This extended period of time does not apply if the franking credits allocated to the distribution would create or increase the company's liability to franking deficit tax.
Broadly, a company is a private company if:
- it does not have its shares listed on an official stock exchange, or
- 20 or fewer persons control 75% or more of either the:
- paid up capital
- voting rights, or
- rights to income of the company. For the purposes of this test an individual, their nominees, their relatives and their relatives' nominees are taken to be one person.
Example: Distribution statement
Rural Pastures is a normal balancing company with an income year ending on 30 June.
On 30 September 2002 the directors decide to pay a distribution of $50,000.
If Rural Pastures is a private company, it will not need to issue a distribution statement within four months of the end of its income year. Therefore, the distribution statement does not have to be issued until 31 October 2003.
This gives Rural Pastures 13 months after the dividend was paid to decide the extent to which it is franked, and issue a distribution statement.
If Rural Pastures is not a private company it would have to decide what franking credits to allocate to the distribution, and issue the distribution statement, at the time, or before, the dividend was paid on 30 September 2002.
End of example