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  • When you are not entitled to claim a franking rebate



    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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    The general effect of the holding period rule and the related payments rule is that, even if a dividend is accompanied by a dividend statement advising that there is an imputation credit attached to the dividend, you are not entitled to claim a franking rebate. An exception applies where you were eligible to apply for the small shareholder exemption during the period 13 May 1997 to 30 June 1999.

    Holding period rule (13 May 1997 to 30 June 1999)

    The following is an explanation of the rule for shareholders whose total franking rebates for the year from all franked dividends, received directly or indirectly through partnerships or trusts, exceeded the threshold of $2,000 in the period 13 May 1997 to 30 June 1999.

    Unless you were contractually obliged to acquire them before 7.30 p.m. Australian Eastern Standard Time (AEST) on 13 May 1997, you must own shares acquired on or after 1 July 1997 for more than 45 days-not counting the day of acquisition or disposal-before you are entitled to a franking rebate from franked dividends paid or credited on the shares. If the shares are preference shares you must hold them for more than 90 days, again not counting the day of acquisition or disposal.

    The relevant holding period for shares and preference shares has to occur during the 'qualification period'. The qualification period begins on the day after you acquire the shares and ends on the 45th day-or 90th day for preference shares-after the day on which the shares or interest in the shares become 'ex-dividend'.

    A share or interest in a share becomes ex-dividend on the day after the last day on which you can acquire the share or interest in the share so as to entitle you to a dividend or distribution in respect of those shares or interest.


    Susan acquires shares on 5 July 1997 and the ex-dividend day is 8 July 1997. In order to be a qualified person in relation to the franked dividends paid on the shares-that is, entitled to claim the franking rebate arising from the franked dividends-Susan will have to hold the shares until 20 August 1997.

    You cannot buy a share and then sell it within 45 days after the day of acquisition-or 90 days for preference shares-and still be entitled to claim the franking rebate for a franked dividend paid or credited on the share. For these purposes you will be treated as having sold the share if you sell a substantially identical share.

    You have to satisfy this rule once only for each purchase of shares. You are then entitled to the franking rebate attached to those shares unless the related payments rule applies.

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    Marie has held 1000 shares in X Pty Ltd for 12 months. She then purchases an additional 500 shares ten days before X Pty Ltd shares go ex-dividend. Twenty days after X Pty Ltd shares go ex-dividend, Marie sells 500 shares. The shares she sold are substantially identical and are deemed to have been held for less than 45 days, based on last in first out. Marie would not be entitled to the franking rebate on the franked dividends paid or credited on these shares.

    A qualification to the holding period rule prevents the counting of days on which the shareholder has 30 per cent or less of the ordinary financial risks of loss, and opportunities for gain, from owning the shares.

    You may reduce the financial risk of owning shares through an arrangement such as hedges, options and futures.

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    Last modified: 23 Dec 2019QC 16138