• Who must lodge a franking account tax return?

    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

    The Franking account tax return 2005 must be completed for all Australian corporate tax entities and New Zealand franking companies that have:

    • a liability to pay franking deficit tax (FDT), and/or
    • a liability to pay over-franking tax (OFT), and/or
    • an obligation to disclose information to the Commissioner of Taxation in relation to any significant variation in their benchmark franking percentage.

    If there is such a liability or disclosure obligation, the entity is required to complete Section A and the remaining labels on the franking account tax return that are relevant to that liability and/or obligation. If there is no such liability or disclosure obligation, lodgment of this tax return is not necessary.

    An entity is a corporate tax entity for the purposes of Part 3-6 of the Income Tax Assessment Act 1997 at a particular time if the entity is a company at that time, or a corporate limited partnership, corporate unit trust or a public trading trust in relation to the income year in which that time occurs.

    A company is a New Zealand franking company if the company:

    • is a New Zealand resident, and
    • has made an election to join the Australian imputation system.

    The Australian imputation rules generally apply to a New Zealand franking company in the same way as they apply to an Australian corporate tax entity.

    Period boxes 'or specify if part year or approved substitute period'

    The Franking account tax return 2005 is for the period 1 July 2004 to 30 June 2005. Please complete the period boxes with the start of the period covered by this tax return to the end of the period if:

    • the entity is an early balancing corporate tax entity, or
    • the entity is a late balancing corporate tax entity (see note), or
    • the entity ceases to be a franking entity part way through its income year or, in the case of a New Zealand franking company, its election to join the Australian imputation system is revoked or cancelled part way through its income year.

    An early or late balancing corporate tax entity is one that has obtained the Commissioner's permission to use an income year that ends on a date other than 30 June. These companies are granted an approved substituted accounting period (SAP) which is in lieu of an income year ending on 30 June (the standard income year).

    Generally, an early balancing corporate tax entity is one that has its 2004-05 income year end before 30 June 2005, while a late balancing corporate tax entity generally has its 2004-05 income year end after 30 June 2005. For more information on SAPs, see Taxation Ruling IT 2360  Income tax: substituted accounting periods.

    Example 1
    MHO Ltd has an approved substituted accounting period ending on 30 September 2005 in lieu of 30 June 2005 - that is, MHO Ltd is a late balancing corporate tax entity. MHO Ltd does not elect to have its franking deficit tax liability determined on a 30 June basis. At the end of the day on 30 September 2005, MHO Ltd has a debit balance in its franking account and consequently it has a liability to pay franking deficit tax. MHO Ltd would complete the period boxes as follows:

    Day

    Month

    Year

    Day

    Month

    Year

    0

    1

    1

    0

    2

    0

    0

    4

    3

    0

    0

    9

    2

    0

    0

    4

    Or specify period if part year or approved substitute period

    Note:
    A late balancing corporate tax entity that has elected to have its FDT liability determined on a 30 June basis must complete the period boxes with 01/07/2004 to 30/06/2005.

    Important messages for late balancing corporate tax entities that elect to have their FDT liability determined on 30 June

    A late balancing corporate tax entity has the option to choose to have its franking deficit tax liability, if any, determined on a 30 June basis, rather than at the end of its income year. For more information, see the fact sheet  Simplified imputation: franking deficit tax liability for late balancing corporate tax entities 

    If a late balancing corporate tax entity makes this choice and it has a debit balance in its franking account on 30 June 2005, then it will be required to lodge a Franking account tax return 2005 to account for this franking deficit tax liability, on or before 31 July 2005. This same entity will also be required to lodge a subsequent franking account tax return within one month after the end of its income year if it has to:

    • account for any over-franking tax liability, and/or
    • disclose any significant variation in its benchmark franking percentage between franking periods.

    The over-franking tax liability, if any, must be paid by the last day of the month immediately following the end of the income year. For more information on over-franking tax and the disclosure obligation, see Over-franking tax and Section C Significant variation in benchmark franking percentage.

    Last modified: 18 Sep 2008QC 18007