Dividend streaming (anti-streaming rules)
Any strategy that aims to avoid wastage of imputation benefits, by directing franked distributions to members who can most benefit from them to the exclusion of other members, may amount to dividend streaming.
This might happen where, for example, some members are non-residents or tax exempt bodies that can't fully use franking credits, and the franking entity seeks to divert franking credits from these members to others who can fully use the credits.
As well as the benchmark rule, there are also specific anti-streaming rules relating to:
- linked distributions, where a member of one entity can choose to receive a distribution from another entity that is franked to a greater or lesser extent than distributions to other members of the first entity
- substitution of tax-exempt bonus shares, where members of an entity can choose to receive tax-exempt bonus shares instead of a distribution from the entity
- distribution streaming, where a corporate tax entity streams distributions to give those members who benefit most from franking credits a greater imputation benefit than those who benefit less.
There is also an anti-avoidance rule (section 177EA of the Income Tax Assessment Act 1936) that applies in certain situations to prevent streaming.
Anti-streaming rules are designed to prevent franked distributions being directed to members who can most benefit from them.