What is the nature of the dividend taken to be paid and what is the effect on the private company's franking account?

Where a deemed dividend arises, an amount is required to be included in the assessable income of the shareholder (or their associate) as if it were an unfranked dividend. This amount is not, however, taken to be paid by the private company.

Further Information

For more information on when payments are treated as dividends refer to the fact sheet Division 7A - payments by private companies.

End of further information

Where a deemed dividend arises under Division 7A in the 2001-02 or subsequent income years because of an honest mistake or inadvertent omission, the Commissioner has the discretion to disregard the deemed dividend subject to conditions being complied with. Refer to the fact sheet Division 7A - exercise of Commissioner's discretion under section 109RB to disregard the operation of Division 7A or allow a deemed dividend to be franked. 

End of attention
    Last modified: 09 Jul 2010QC 17635