• Over-franking tax

    Attention

    Warning:

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

    End of attention

    Where the franking percentage for a distribution exceeds the benchmark franking percentage, liability for over-franking tax arises unless the Commissioner has made a determination permitting the over-franking.

    Show at label D the amount of over-franking tax worked out using the following formula:

    Franking % differential

    X

    Amount of the frankable distribution

    X

    30
    70

    where:

    • the franking % differential is the difference between the franking percentage for the frankable distribution and either:
      • the entity's benchmark franking percentage for the franking period in which the distribution is made, or
      • the franking percentage permitted by the Commissioner in a determination allowing the corporate tax entity to depart from the benchmark rule.
       

    For more information refer to the fact sheet Simplified imputation: the benchmark and anti-streaming rules which is available on our website.

    Example 4
    OFT Pty Ltd made a distribution of $500 to its members and allocated franking credits of $214 resulting in a franking percentage of 100%. The benchmark franking percentage for the franking period was 50%. As OFT Pty Ltd has franked the distribution to more than the benchmark percentage it will be liable to over-franking tax calculated as follows:

    100% - 50% X $500 X

    30
    70

    = $107

    The $107 over-franking tax will be shown in label D.

    Example 5
    Late balancing entity that had its franking deficit tax liability determined on 30 June and now has an over-franking tax liability

    Felix Ltd is a public company that has an approved substituted accounting period ending on 30 September 2004 in lieu of 30 June 2004. Felix Ltd, being a late balancing corporate tax entity, elected to have its franking deficit tax liability determined on a 30 June basis. On 30 June 2004 Felix Ltd had a deficit balance of $100 in its franking account. Felix Ltd is required to lodge a Franking account tax return 2004 disclosing this liability on or before 31 July 2004.

    In addition to this, Felix Ltd had an over-franking tax liability of $150 for its first franking period (1 October 2003 to 31 March 2004) and then $200 for its second franking period (1 April 2004 to 30 September 2004). Felix Ltd is required to lodge a subsequent Franking account tax return 2004 disclosing this over-franking tax liability of $350 at label D, by 31 October 2004. In addition, Felix Ltd must print X in the yes box at Section A, Is this a subsequent franking account tax return for the income year?

    Last modified: 18 Sep 2008QC 17477