• Fact sheet 2005 - Refunding franking credits to endorsed income tax exempt charities and/or deductible gift recipients

    A PDF version of this fact sheet is also available.

    Introduction

    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

    As a result of changes to the income tax law effective from 1 July 2000, franking credits attached to franked dividends received by endorsed income tax charities (ITECs) and/or deductible gift recipients (DGRs) are generally refundable, provided certain entitlement criteria are met.

    Franking credits arise for shareholders when certain resident Australian entities pay income tax on their taxable income and distribute their after-tax profits by way of franked dividends. These franked dividends have franking credits attached. ITECs and DGRs can receive these franked dividends either directly as a shareholder, or indirectly as a beneficiary of a trust. ITECs and DGRs that receive fully or partly franked dividends may now be entitled to a refund of the franking credits attached to those franked dividends.

    ITECs and DGRs could not benefit from franking credits before 1 July 2000 as franking credits could only reduce an amount of tax payable and could not be refunded. For organisations such as ITECs and DGRs, there was never any income tax payable against which franking credits could be offset. Refunding of franking credits ensures that ITECs and DGRs now receive the full benefit of their franking credits.

      Last modified: 20 Jul 2015QC 18199