What do the changes mean for a member of a co-operative company?

All entities (excluding partnerships and trusts) that are members of a co-operative company and are in receipt of a franked distribution must:

  • include the distribution, together with the franking credits allocated to the distribution, in their assessable income, and
  • obtain a tax offset equal to the amount of franking credits included in their assessable income. This tax offset can be used to reduce the entities' own income tax liabilities.

The process outlined above is commonly referred to as the 'gross-up and credit' approach.

A franked distribution to certain partnerships and trusts is treated as flowing indirectly to members of the partnership or trust. Each member's share of the franking credit on the distribution is included in their assessable income (generally this will occur indirectly as a result of the gross-up being included in the trust or partnership net income). Each member is then given a tax offset equal to that share of the franking credit, provided the member is not itself a partnership or trust through which the distribution flows indirectly.

Where the trustee, rather than a member, is the taxpayer in respect of a share of the distribution, it is the trustee in that capacity who is given the tax offset for the share of the franking credit.

Certain eligible members may be entitled to a refund if the tax offset allowed exceeds the members' basic income tax liability.

Further Information

For more information on refunds of excess imputation credits refer to Refunding imputation credits: snapshot view.

End of further information

If the member is a corporate tax entity, it can pass on the benefit of having received a franking credit on the distribution to its own members by franking distributions made to them. Corporate tax entities are not eligible for a refund of imputation tax offsets. However, pursuant to the proposed loss wastage measures, corporate tax entities will no longer be required to use up losses that could be deductible in a later year of income against franked dividends.

Non-resident members that are in receipt of franked distributions are not subject to any further income tax liability on the distribution, nor are they subject to the withholding tax provisions in the income tax law.

Further Information

For more information on the effects of receiving a franked distribution, refer to Simplified imputation: the tax effect of receiving a franked distribution.

End of further information

Example 7:
Angela, an Australian resident, is a member of JLO, which is a co-operative company. During the 2002-03 income year Angela received a dividend distribution on shares that she holds in JLO. The distribution statement that accompanied the dividend payment had the following details:

Unfranked part:

Franked part:

Franking credit:




Angela would complete her 2002-03 tax return as follows:

Item 10S

Item 10T

Item 10U




As Angela is an Australian resident, she may be eligible for a refund of excess imputation credits if the amount of the imputation tax offset exceeds her basic income tax liability.

Further Information

For more information on entitlement to refunds of excess franking credits, refer to the fact sheet Refunding imputation credits: overview.

End of further information
    Last modified: 17 Dec 2015QC 17074