Non-profit News Service No. 0413 - Preventing dividend washing
A new integrity rule has been enacted to prevent taxpayers from claiming additional franking credits as a result of dividend washing. Dividend washing is a practice where taxpayers seek to claim two sets of franking credits. They do this by selling shares held on the Australian Securities Exchange (ASX) that have become ‘ex-dividend’ and then effectively repurchasing the shares using a special ASX trading market. Some not-for-profit entities may have received offers to engage in these arrangements.
The new integrity rule applies from 1 July 2014. However, taxpayers who have participated in dividend washing transactions in prior years should be aware that the Commissioner may apply the anti-avoidance legislation to deny franking credit benefits to these arrangements.