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  • Share of credits from income and tax offsets

    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

    If the partnership income includes or is attributable to:

    • income from which an amount of tax was withheld because an Australian business number was not quoted, then enter your share of the credit at Tax withheld where ABN not quoted
    • interest, dividends and unit trust distributions from which tax file number (TFN) amounts have been withheld, then enter your share of the credit at TFN amounts withheld from interest, dividends, and unit trust distributions
    • payments from a closely held trust from which TFN amounts have been withheld, then enter your share of the credits for those amounts withheld at TFN amounts withheld from payments from closely held trusts
    • national rental affordability scheme (NRAS) rent, then enter your share of the NRAS tax offset at National rental affordability scheme tax offset.

    Also, if the partnership income includes or is attributable to income that

    • you received when you were an Australian resident from which an amount of tax was withheld because of the imposition of non-resident withholding tax or managed investment trust withholding tax, or
    • you derived as a foreign resident from which an amount of tax was withheld because of the operation of the foreign resident withholding rules.

    then enter the amount of these credits for amounts withheld at Credit for foreign resident withholding amounts (excluding capital gains)

    Franking credits

    Enter the amount of your share of any allowable franking credits which you are entitled to claim as a franking tax offset through a partnership at Franking credit from franked dividends.

    You can only claim a share of a franking credit which relates to the share of a franked dividend paid to a partnership which is indirectly included in the amount of partnership income or loss you show at Distribution from partnerships less foreign income.

    Therefore, you cannot claim a franking credit for a dividend paid to the partnership which was exempt income or non-assessable non-exempt income.

    In addition, in order to claim a franking credit in respect of a particular dividend both you and the partnership must be qualified persons in relation to that dividend (see below).

    Qualified person

    There are rules, known as franking credit trading rules, designed to prevent the use of franking credits by persons who only briefly own their shares or who do not effectively own their shares. Under these rules, known as the 'holding period rule' and the 'related payments rule', you must satisfy certain criteria before you are considered to be a qualified person.

    If you derived dividends indirectly through a partnership you need to determine what component of the partnership distribution is attributable to a particular dividend, and then determine whether you have satisfied the holding period rule and the related payments rule in relation to that dividend.

    The partnership itself must also have satisfied these rules.

    The holding period rule applies to shares bought on or after 1 July 1997. It applies to you if you (or the partnership) sold shares within 45 days of buying them. It also applies to you if you (or the partnership) entered into a risk reduction arrangement, such as a derivative transaction, within that time. The holding period is 90 days for certain preference shares.

    The related payments rule applies to arrangements entered into after 7.30pm (Australian Eastern Standard Time) on 13 May 1997. It applies to you (or the partnership) if you were under an obligation to make a related payment for a dividend and you did not hold your shares 'at risk' during a specified qualifying period.

    If you failed to satisfy the holding period rule, and the related payments rule does not apply to you, you may still be entitled to a franking tax offset if you qualify for the small shareholder exemption. The small shareholder exemption applies provided that you do not exceed the franking tax offset ceiling of $5,000 on all your franking tax offset entitlements in a given year, whether received directly or indirectly through a partnership.

    If any of these measures are likely to affect you, see You and your shares.

      Last modified: 28 Jun 2018QC 55612