Refunding excess imputation credits snapshot view

The Review of Business Taxation (RBT) recommended that resident individuals, superannuation funds and like entities should be taxed on dividend income at their appropriate tax rates, rather than at the company tax rate. Therefore the review recommend that imputation credits be refunded to these taxpayers.

Further, on 13 April 2000, the Government announced that it would legislate to refund excess imputation credits to registered charitable and gift deductible organisations. This will ensure that generally speaking, those organisations are not subject to tax on their investments even where made in or through taxable companies.

What is the change?

The new law will expand the class of tax offsets that are subject to the refundable tax offset rules to include imputation credits. The only tax offset that was refundable prior to the introduction of this measure is the private health insurance tax offset.

Provided anti-avoidance provisions are not triggered, taxpayers eligible for the refund are resident:

  • individuals;
  • trustees assessed under sections 99 (but not 98 or 99A) of the Income Tax Assessment Act 1936;
  • complying superannuation funds;
  • complying approved deposit funds;
  • life assurance companies (in respect of dividends derived from assets attributable to their insurance business and not held on behalf of their shareholders);
  • pooled superannuation trusts; and
  • certain registered charitable and gift deductible organisations.

How do you apply for the refund?

  • Resident individuals, complying superannuation funds, life insurance companies, complying approved deposit funds, pooled superannuation trusts and trustees assessed under section 99 who have a current income tax obligation are required to use the lodgment of the income tax return for claiming a refund of excess imputation credits or franking rebates.
  • Resident individuals who don't need to lodge a tax return can apply to the ATO for a refund using the Refund of imputation credits application and instructions for individuals booklet. Recipients of maximum rate government pensions or allowances who are possibly eligible for the refund because they own shares will receive a booklet in the mail.
  • Resident individuals who don't need to lodge a tax return and who want a faster refund, can apply by simply phoning 13 28 65.
  • Endorsed income tax-exempt charities or deductible gift recipients will receive a personalised refund application package by the end of May 2001. They will need to complete the application form and send it to the ATO.
  • Applications for refunds of imputation credits will be processed by the ATO from 1 July 2001. Refund applications relating to subsequent years may be made after 30 June each year.

Where can this law be found?

The refunding of excess imputation credits measure is contained in Division 67 of the ITAA 1997 and was inserted by Schedule 2 of the New Business Tax System (Miscellaneous) Act (No. 1) 2000.

Additional amendments were enacted by the Taxation Laws Amendment Act (No 2) 2002. These amendments altered the original measures to deny a refund of excess imputation credits to trustees assessed under section 98, non-complying superannuation funds and non-complying approved deposit funds and have retrospective effect.

    Last modified: 05 Aug 2003QC 16428