• ## Section C

### Significant variation in benchmark franking percentage

For a corporate tax entity that is a private company, a franking period is the same as its income year.

For corporate tax entities that are not private companies, there are ordinarily two franking periods in an income year. The first franking period is the first six months beginning at the start of the entity’s income year; and the second franking period will be the remainder of the income year.

### Was there a significant variation in benchmark franking percentage between franking periods?

Where a corporate tax entity has a significant variation in its benchmark franking percentage between franking periods, it has an obligation to disclose this information to the Commissioner (unless it is a listed public company that satisfies certain criteria, or is a 100% subsidiary of such a company).

A significant variation occurs where the benchmark franking percentage for the current franking period has increased or decreased by more than 20 percentage points for each franking period. The time frame for determining whether a significant variation has occurred starts immediately after the last franking period in which a frankable distribution was made (the last relevant franking period) and ending at the end of the current franking period.

• A corporate tax entity may apply for permission to depart from the benchmark rule. The application must be in writing and a departure will only be permitted in extraordinary circumstances that would be unforeseeable and beyond the control of the entity, its members and controllers. The approval of the Commissioner must be obtained before the entity lodges the franking account tax return with the altered franking percentage.
• For a corporate tax entity that makes a frankable distribution in every franking period, the effect of the above formula is that a significant variation will occur where the benchmark franking percentage increases or decreases between franking periods by more than 20 percentage points.
• Examples 6 and 7 will help you to work out whether there was a significant variation in your entity’s benchmark franking percentage between franking periods.

If there was a significant variation, print X in the Yes box at Was there a significant variation in benchmark franking percentage between franking periods? on the Franking account tax return 2020. Complete the rest of section C.

• For the purposes of recording the benchmark franking percentage at G to J, the value stated should be worked out to two decimal places, rounding up if the third decimal place is 5 or more.
• Listed public companies that satisfy the criteria set out in subsection 203-20(1) of the ITAA 1997, and 100% subsidiaries of such companies, do not need to complete section C.

If there was no significant variation, print X in the No box at Was there a significant variation in benchmark franking percentage between franking periods? on the Franking account tax return 2020. Do not complete the rest of section C.

Example 6 Corporate tax entity with two franking periods

XYZ Ltd is an unlisted public company. Its income year started on 1 July 2019 and ended on 30 June 2020. Its franking periods and benchmark franking percentage for 2019–20 were:

Table 5 - Corporate tax entity, XYZ Ltd, with two franking periods

Franking period

Period

Benchmark franking percentage

1

1 July 2019 to
31 December 2019

50.455

2

1 January 2020
to 30 June 2020

100.000

XYZ Ltd’s franking percentage for franking period 2 is 100%. This is an increase in the benchmark franking percentage for franking period 1 by an amount that is greater than 20 percentage points, resulting in a significant variation in the benchmark franking percentage. XYZ Ltd has an obligation to disclose this information on its 2019–20 franking account tax return. Consequently it:

• prints X in the Yes box at Was there a significant variation in benchmark franking percentage between franking periods?
• completes the benchmark franking period and percentage boxes.
End of example

Example 7 Private company

Dombey Pty Ltd is a private company that has an income year from 1 July 2019 to 30 June 2020. The franking period of a private company is the same as its income year.

Therefore for the 2019–20 income year, Dombey Pty Ltd’s

• first franking period was from 1 July 2018 to 30 June 2019 – and during 2018–19 Dombey Pty Ltd’s benchmark franking percentage was 60% and
• second franking period was 1 July 2019 to 30 June 2020 – and during 2019–20 Dombey Pty Ltd’s benchmark franking percentage was 30%.

For 2019–20, Dombey Pty Ltd:

• completes section C in the franking account tax return, because its benchmark franking percentage decreased by more than 20 percentage points in the franking period for 2019–20
• prints X in the Yes box at Was there a significant variation in benchmark franking percentage between franking periods?
• completes the benchmark franking period and percentage boxes.
End of example