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Integrity rules

Integrity rules for entities receiving a franked distribution under the imputation system.

Last updated 27 November 2023

Integrity rules ensure that the imputation system is not used to benefit members who don't have a sufficient economic interest in the entity, or to prefer some members over others.

Where the imputation system has been manipulated a tax offset will be denied.

The assessable income of an entity that receives the distribution directly will not be grossed-up. An entity that receives the distribution indirectly will be allowed a deduction (or reduction) to ensure its assessable income does not include its share of the franking credit.

There is also a general disclosure rule that requires franking entities to notify us if the entity’s benchmark franking percentage varies significantly between franking periods. This helps us identify cases where anti-streaming rules might apply.

Individuals that are Australian resident members must meet the anti-avoidance rules to receive a refund. An individual who does not make a related payment may also have consideration to the small shareholder exemption which is subject to a $5,000 threshold (see eligibility details in Refunding excess franking credits – individuals).

The integrity rules are addressed by:

Check anti-streaming rules preventing franked distributions being directed to members who benefit most from them.

Work out restrictions on franking credit trading.

How share capital tainting rules prevent companies from transferring profits to distribute to shareholders.

QC47313