• Franking deficit tax

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    Under the simplified imputation system a liability to pay franking deficit tax will arise where one of the following occurs:

    • A corporate tax entity has a franking deficit in its franking account at the end of its income year, or at the time it ceases to be a franking entity or, in the case of a New Zealand franking company, its election to join the Australian imputation system is revoked or cancelled.
    • Just before the entity becomes a subsidiary member of a consolidated group the subsidiary has a franking deficit in its franking account.
    • A corporate tax entity receives certain refunds of income tax within three months after the end of the income year, or within three months after it ceases to be a franking entity, and a franking deficit (or an increase in a franking deficit) would have arisen if the refund had been received in the income year. For more information see A refund of income tax affecting a franking deficit tax liability in these instructions.

    A franking entity is a corporate tax entity that is not a mutual life insurance company. Where the entity is a company that is a trustee of a trust, it will be a franking entity at a particular time if it is not acting in its capacity as trustee of the trust at that time.

    A late balancing corporate tax entity that elects to have its franking deficit tax determined on a 30 June basis will be liable to pay franking deficit tax where a franking deficit exists at the end of 30 June or immediately before it ceases to be a franking entity or, in the case of a New Zealand franking company, its election to join the Australian imputation system is revoked or cancelled. It will also be liable to pay franking deficit tax if it receives certain refunds of income tax within three months of the period ending on 30 June-see A refund of income tax affecting a franking deficit tax liability in these instructions. Refer also to Important messages for late balancing corporate tax entities that elect to have their FDT liability determined on 30 June.

    A franking deficit exists where the total franking debits exceed the total franking credits.

    Show at label B the sum of the amounts of the franking deficit in the franking account:

    • at the end of the income year (or the 12 month period ending on 30 June) or at the time the entity ceased to be a franking entity or, in the case of a New Zealand franking company, its election to join the Australian imputation system is revoked or cancelled, taking into account any refunds taken to have been received in that period (see A refund of income tax affecting a franking deficit tax liability in these instructions), and
    • if applicable, just before the entity becomes a subsidiary member of a consolidated group.

    This is the amount of franking deficit tax that is payable.

    Attention

    Note
    If you are required to complete label F-see A refund of income tax affecting a franking deficit tax liability-then you must include the amount shown at label F (if any) in the amount at label B.

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    Last modified: 18 Sep 2008QC 17477