• Offsetable portion of current year FDT

    Attention

    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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    The franking additional tax provisions have been replaced with a modified franking deficit tax offset entitlement. The franking deficit tax offset entitlement is the amount that a corporate tax entity is allowed to claim as an offset against future income tax liabilities.

    Where a company has a franking deficit in its franking account at the end of its income year (or 30 June for certain late balancing corporate tax entities) and its franking deficit tax liability is greater than 10% of the total franking credits that arose in the franking account during the income year (or for certain late balancing entities the 12 month period ending on 30 June) then the amount of franking deficit tax offset that the corporate tax entity is entitled to because of the franking deficit is calculated as follows:

    Franking deficit tax liability - (Franking deficit tax liability x 30%)

    This reduced amount of franking deficit tax offset entitlement equals the portion of franking deficit tax that is offsetable because of the current year's deficit only. This amount should be recorded at label C.

    Attention

    Note
    The amount shown at label C of this franking account tax return is only step 1 in the calculation to determine the whole amount that you are entitled to as an FDT offset against any income tax liabilities arising in the Company tax return 2004. Please refer to the instruction guide accompanying the Company tax return 2004 for more information on how to calculate this amount.

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    Example 3
    At the end of its income year, NYC Ltd had a franking deficit of $30 in its franking account. During the income year NYC Ltd generated total franking credits of $100. As NYC Ltd's franking account was in a $30 deficit position at the end of its income year it is liable to pay franking deficit tax of $30. NYC Ltd will show this amount at label B.

    In addition to this, as the franking deficit tax of $30 is greater than 10% of the total franking credits that arose in its franking account during the income year (ie $100 x 10% = $10), NYC Ltd's franking deficit tax offset entitlement for the current year must be reduced to $21 (ie $30 - ($30 x 30%)). NYC Ltd must record this amount at label C.

    Note
    If the franking deficit tax liability is less than or equal to 10% of the total franking credits that arose in the franking account during the income year (or for certain late balancing entities the 12 month period ending on 30 June) then the full amount of franking deficit tax liability recorded at label B can be used to calculate the franking deficit tax offset that the corporate tax entity is entitled to because of the current year's deficit. This same amount should be recorded at label C.

    Last modified: 18 Sep 2008QC 17477