What happens when a co-operative company chooses to frank distributions made to its members
If a co-operative company chooses to frank distributions made to its members from assessable income for the current income year:
- generally it will be subject to the imputation rules in the same way as those rules apply to all other corporate tax entities that are franking entities, and
- it will not be entitled to a deduction for that part of the distribution that it has franked.
Example: Fully franked distribution
JLO, a co-operative company, has assessable income of $7,000 that it wants to distribute to its members. It has sufficient franking credits in its franking account to fully frank this distribution.
On 1 June 2003 it decides to distribute its entire assessable income of $7,000 to its members and allocate the maximum amount of franking credits of $3,000 to the distribution. This means that the distribution is fully franked.
No deduction will be allowed for the $7,000 that JLO distributes to its members, as no part of this distribution represents an unfranked distribution.
End of example