• ### Over-franking tax

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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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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 × Amount of the frankable distribution × (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.

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% × \$500 × (30 ÷ 70) = \$107

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

End of example

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?

End of example