The franking account is a record of franking credits and franking debits that arise within an income year. All corporate tax entities are required to maintain a franking account.
Typically a franking credit would arise in the franking account when the corporate tax entity pays its income tax or when it receives a franked dividend. A franking debit would arise when the corporate tax entity pays a franked dividend or receives a refund of income tax that it has paid.
The franking account now operates on a tax-paid basis; this means that if a company pays tax of $30 it would generate a franking credit of $30 in its franking account.
In addition to this, the franking account operates on a 'rolling balance' basis. This means that the closing balance at the end of a corporate tax entity's income year will be its opening balance at the start of its next income year.
For more information on the rules for the franking account, refer toSimplified imputation: the franking account.