The benchmark rule provides that all frankable distributions made by a corporate tax entity during a franking period must be franked to the same extent - the benchmark franking percentage.
The simplified imputation system does away with the strict 'required franking amount rule' and allows a franking entity to select its preferred rate of franking for its distributions, provided the franking percentage does not exceed 100%.
The benchmark rule is designed to address streaming opportunities that would have been otherwise available due to this relaxation of the required franking rule.
Example 1: The benchmark rule
Stanley Supplies Pty Ltd makes a distribution franked to 50% at the start of the franking period. The benchmark rule provides that Stanley Supplies Pty Ltd will have to frank all its frankable distributions to 50% for that franking period.