Which endorsed charities are eligible?
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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To be eligible for a refund of franking credits, an entity must meet all of the following requirements:
- have an Australian business number (ABN)
- satisfy the residency requirement
- be a charity endorsed by us as exempt from income tax.
An income tax exempt fund, under repealed item 4.1 of section 50-20 of the Income Tax Assessment Act 1997 that was endorsed on or before 31 December 2013 is treated as an endorsed charity that is exempt from income tax.
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Which deductible gift recipients are eligible?
To be eligible for a refund of franking credits, a deductible gift recipient (DGR) must meet all of the following requirements:
- have an Australian business number (ABN)
- satisfy the residency requirement
- the entity must be endorsed by us as a DGR in its own right or be a DGR listed by name in the Income Tax Assessment Act 1997.
A DGR must be endorsed in its own right. It is not sufficient if your DGR is only endorsed in relation to a fund, authority or institution that it operates, such as a school building fund.
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What is the residency requirement?
Endorsed charities and endorsed deductible gift recipients will satisfy the residency requirement if, at all times during the income year for which organisation is applying for a refund, it meets both of the following requirements:
- it has a physical presence in Australia
- to the extent that it has a physical presence in Australia, it incurs its expenditure and pursues its objectives principally in Australia.
How do you check if your organisation is eligible?
Visit the Australian Business Register website at abn.business.gov.auExternal Link or phone us on 1300 130 248 to check if your organisation is:
- a DGR
- endorsed as a charity exempt from income tax
What are the requirements for developing country relief funds?
An entity is eligible for a refund of franking credits if it is a public fund declared by the Treasurer to be a developing country relief fund, and it has not been prescribed by regulation as an entity ineligible for the concession.
How does your organisation apply for a refund of franking credits?
Eligible organisations apply for a refund of franking credits annually on the Application for refund of franking credits (NAT 4131).
In the last week of June of each year, we send a personalised refund application package to eligible organisations that applied for and received a refund in the previous financial year.
Recent changes to the tax law mean your organisation now has objection rights and time limits in which to amend its claims for tax offset refunds (here being a refund of franking credits). These changes apply to franking credits attached to dividend income and attached to the entitlement to franked distributions for the year ended 30 June 2014 onwards. The changes also mean your claim for (or an amendment of) a tax offset refund will be subject to an income tax assessment.
There are time limits for requesting an amendment to an assessment. We cannot amend an assessment if the time limit has passed.
Notices of assessment
If you are a:
- trust or a government entity, we will give you a notice of assessment
- company, a notice of assessment will be deemed to have been given when you lodge this form If an amendment is made to any original assessment, we will give you a notice of amended assessment.
A notice of assessment or a notice of amended assessment will include the following information:
- the amount of your organisation’s taxable or net income (or that the amount is zero)
- the amount of the tax payable on that taxable or net income (or that the amount is zero)
- the total of your organisation’s tax offset refunds (or that the amount is zero).
Application form changes
The following changes have been made to the application form as a result of tax offset refunds being brought into the assessment regime:
- Label B now specifies that your total of franking credits is your tax offset refunds amount.
- New label C has been added, in which you are required to you add the amounts at label A and label B. If you do not complete this label correctly, it may take longer for us to process your refund.
- New label D has been added to show your taxable or net income. As you must be income tax exempt or an income tax exempt deductible gift recipient to be eligible to complete this form; we have prefilled the new label D with ‘00’.
- New label E has been added to show your tax payable. As you must be income tax exempt or an income tax exempt deductible gift recipient to be eligible to complete this form, we have prefilled the new label E with ‘00’.
Get it done
Eligible organisations that want to apply for a refund but have not received a refund package by the end of the last week of June should phone us on 1300 130 248.
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Can the refund be paid directly into your financial institution account?
Yes. If you complete the electronic funds transfer (EFT) section of the application form, we deposit the refund directly into your organisation's Australian bank, credit union or building society account of choice. It is faster to have the refund paid directly to your organisation's financial institution account.
What if your organisation has outstanding tax liabilities?
If your organisation has any outstanding tax liabilities or other debts that are collected by us, the amount of any refund will be offset against those tax liabilities and debts. Any remaining amount will then be refunded to your organisation.
Are there any limits on claiming refunds?
Rules apply to prevent an eligible organisation from receiving a franking credit on a distribution which is attributable to a franked dividend through another eligible organisation. This ensures multiple tax offsets cannot be claimed in respect of the same franked dividend.
A charitable trust, Charity, is an eligible organisation. It is paid a fully franked dividend of $5,000. Attached to the dividend is a franking credit of $2575 which Charity claims from the Tax Office. As a consequence of the dividend, Charity makes a distribution of $5000 to Benevolence another charitable trust that is an eligible organisation. Benevolence's entitlement to the the distribution arose in its capacity as a beneficiary of Charity. Benevolence is not entitled to any franking credit in relation to the distribution from Charity. This means it has no entitlement to a tax offset.
The following rules also prevent the unintended use of franking credits:
- specific anti-avoidance rules for eligible organisations
- franking credit trading rules
In addition to the above, the general anti-avoidance rules can apply.
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What are the specific anti-avoidance rules?
A franking credit refund will not be available to an eligible organisation on payment of a franked dividend directly from the company or indirectly, through an entitlement to a franked distribution (e.g. through a trust), if a transaction related to that payment results in any of the following:
- the organisation obtaining a reduced benefit from the franked dividend (or notional trust amount)
- the organisation, or another entity, providing a benefit or incurring a detriment
- the entity that pays the dividend or trust distribution (or their associate) obtaining an advantage
- failure to pass full, unconditional ownership of property comprising the dividend (or trust distribution) to the organisation at the time of payment.
What are the franking credit trading rules?
Your organisation's entitlement to a franking credit refund may be affected by the holding period rule, the related payments rule or the dividend washing integrity rule. The Commissioner may make a determination to deny imputation benefits where your organisation has entered into a scheme for the purpose of obtaining franking credit benefits.
Holding period rule
Under the holding period rule, your organisation must hold shares (or an interest in shares) at risk for at least 45 days (or 90 days for preference shares). If the organisation is under no obligation to make a related payment, this rule only needs to be met once for each purchase of shares (or an interest) subject to the ‘last in-first out’ rules.
Moreover, it is also important to note that the 45 day period (or 90 day period for preference shares) does not include the day your organisation acquired the shares or the day the shares were disposed.
Related payments rule
The related payments rule applies if your organisation has made, or is under an obligation to make, a related payment – that is, to pass on the benefit of a franked dividend to someone else. Under the related payments rule, your organisation must hold shares (or an interest) at risk for at least 45 days (or 90 days for preference shares) during the secondary qualification period to be eligible for a refund of franking credits. This rule must be met for all dividends and distributions where a related-payment will be made.
The secondary qualification period means the period starting on the 45th day before, and ending on the 45th day after, the day the shares (or an interest) became ex-dividend (or 90 days before and after if the shares are preference shares).
Dividend washing integrity rule
The integrity rule applies to prevent you from claiming franking credits where you have received a dividend as a result of dividend washing.
Dividend washing occurs where:
- you, or an entity connected to you, sell an interest in shares that you hold while retaining the right to a dividend, then
- by using a special ASX trading market, you effectively repurchase an interest in shares, generally in the same company, and receive an entitlement to a second dividend.
If the dividend washing integrity rule applies, you are not entitled to claim the franking credits for the second dividend. However, if your interest in the second parcel of shares exceeds the interest in the first parcel, you may be entitled to claim a portion of these additional franking credits. For more information, refer to ato.gov.au/dividendwashing
The ATO’s view is that the general anti-avoidance legislation may be applied to dividend washing transactions not impacted by the integrity rule.
For more information about the refund of franking credits:
For answers to frequently asked questions about the refund of franking credits for eligible organisations, refer to Refund of franking credits - frequently asked questions.
To apply for a refund of franking credits, refer to:
If you do not speak English well and need help from the ATO, phone the Translating and Interpreting Service on 13 14 50.
If you are deaf, or have a hearing or speech impairment, phone the ATO through the National Relay Service (NRS) on the numbers listed below:
Information on refund of franking credits 1 July 2013 to 30 June 2014 (NAT 6716).
- TTY users, phone 13 36 77 and ask for the ATO number you need
- Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
- internet relay users, connect to the NRS on relayservice.com.auExternal Link and ask for the ATO number you need.