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  • Your franking rebate (tax offset)



    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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    If you are paid or credited fully or partly franked dividends-that is, they carry an imputation credit for which you are entitled to claim a franking rebate-your assessable income includes both the amount of the dividends you were paid or credited and the amount of imputation credit attached to the dividends. The sum of these amounts is referred to as the 'grossed-up' amount. You must include both amounts when you lodge your tax return-tax is payable at your applicable tax rate on these amounts.

    If the imputation credit is included in your assessable income, you can claim the imputation credit as a franking rebate-also known as a tax offset.

    The franking rebate can be used to reduce your tax liability from all forms of income, not just dividends, and from taxable net capital gains. The John Citizen example, under the heading Effect on tax payable, shows you how this works.

    Your franking rebate cannot create a refund. If you have any remaining franking rebate available after your tax liability has been reduced to nil, it will be lost. You cannot:

    • carry an excess amount forward to be used against any future tax liability
    • carry it back to reduce any previous tax liability
    • transfer it to another person.

    You can use your franking rebate only to reduce your tax liability. You cannot use it to reduce the Medicare levy. For further information on the Medicare levy see TaxPack 2000.

    However, under proposals contained in the New Business Tax System (Miscellaneous) Bill 1999, from 1 July 2000 excess franking rebates will be refunded after any income tax liability has been met.

    Note: Your entitlement to a franking rebate may be affected by the holding period rule and the related payments rule. However, different rules apply for the period 13 May 1997 to 30 June 1999 and from 1 July 1999.

    The general thrust of these measures operates from 1 July 1997-and in some cases 13 May 1997-and applies unless you elect for the small shareholder exemption to apply. This exemption is applicable only during the period 13 May 1997 to 30 June 1999 where your total entitlement to franking rebates was $2,000 or less.

    You cannot make an election for the small shareholder exemption for the period 13 May 1997 to 30 June 1999 where the related payments rule applies to dividends paid or credited to you.

    Under these measures a franked dividend is treated as an unfranked dividend where, ignoring the days of acquisition and disposal, the shares are held 'at risk' for less than 45 days-or less than 90 days for preference shares. This means that imputation credits are ignored and no franking rebate is allowed.

    Last modified: 23 Dec 2019QC 16138