There are a number of transactions that need to be performed to an existing franking account at the end of 30 June 2002 and at the start of 1 July 2002 to facilitate the transition from the former imputation system to the simplified imputation system.
For corporate tax entities whose income year ends on 30 June or who are late balancing entities (that is, their income year ends after 30 June):
- On 30 June 2002, corporate tax entities that have a class C franking account under the former imputation system will close off that franking account. This includes squaring off franking accounts that have a franking deficit (total franking debits exceed total franking credits) to crystallise their franking deficit tax liability.
- Franking credits arise in the class C franking account to cancel any outstanding franking debits that arose due to an estimated debit determination made before 1 July 2002.
- At the start of 1 July 2002 franking accounts under the simplified imputation system are established.
- Class C Franking account surpluses (total franking credits exceeds total franking debit) from the former imputation system are rolled over into the new franking account and the new franking period by applying a factor of 30/70.
Example 2: Converting franking surpluses
At the end of the day on 30 June 2002, Trixie Pty Ltd has a Class C franking surplus of $7,000.
On 30 June, Trixie Pty Ltd closes off the Class C franking account. It opens a new franking account on 1 July 2002 and credits the new franking account with $3,000 ($7,000 x 30/70).