A corporate tax entity is entitled to a tax offset for an income year where it satisfies the residency requirement and at least one of the following conditions applies:
- the entity has incurred a liability to pay FDT in that year
- the entity has carried forward an amount of FDT offset that could not be applied against an income tax liability in a previous income year, and
- the entity incurred a liability to pay FDT in a previous income year but did not meet the residency requirement, and was therefore not entitled to an FDT offset for that income year.
Broadly, an entity satisfies the residency requirement if they are:
- an Australian resident for more than one half of an income year, or
- if the entity was in existence for less than 6 months.
However, the entity would still pass the residency requirement if it was a resident for all times during the year when it existed.
Late balancers can calculate the amount of the FDT offset they are entitled to using the special rules described below.
For late balancers who have not elected to have their FDT liability determined on 30 June, there is only a special rule to calculate the amount of the FDT offset for the 2001-02 income year. In later income years the normal rules in section 205-70 of the Income Tax Assessment Act 1997 will apply to calculate the amount of their FDT offset.For more information see Simplified imputation: franking deficit tax offset.
For late balancers who elected to have their FDT liability determined on 30 June, the ongoing special rules to calculate FDT liability are described below.