Simplified imputation system from 1 July 2002
The system has been further improved by the introduction of the simplified imputation system effective from 1 July 2002. The imputation provisions were rewritten for the Income Tax Assessment Act 1997 (ITAA 1997) to achieve similar outcomes using a simpler mechanism. The key changes were:
- the franking account operates on a tax-paid basis and is now a rolling-balance account
- the introduction of franking periods enabling corporate tax entities to align their franking period with their income year for determination of franking deficit tax liability
- the benchmark rule replaces the 'required franking amount' rules and while similarly limiting streaming opportunities, provides greater flexibility in allocating franking credits to frankable distributions
- the gross-up and credit approach replaces the inter-corporate dividend rebate for companies in receipt of franked distributions, and
- corporate tax entities will be able to choose the extent to which they frank a distribution, subject to the benchmark rule.
These key changes are explained further in this reference guide.