What is the residency requirement?

An individual or corporate tax entity that receives a franked distribution directly must be an Australian resident at the time the distribution is made to be eligible for the tax offset for franking credits.

If the taxpayer is not a resident, the franked distribution would be subject to the rules governing withholding tax and therefore exempt from income tax, removing the need for the tax offset. The taxpayer's income in this instance would not be grossed-up. (Note that although the distribution would be subject to the withholding tax rules, there would be no withholding tax payable as the distribution is franked.)

    Last modified: 28 Jul 2016QC 16622