Deferring a franking deficit

If a late balancing corporate tax entity chooses to use 30 June as the basis for determining its FDT liability, and in the 2002-03 or later income year, it receives a refund within 3 months after 30 June in that year, and:

  • the refund is in relation to a period of 12 months ending at the end of 30 June in that year, and
  • the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June if the refund had been immediately received before that time.

Then the refund will be taken to have been received immediately before 30 June. This will result in the corporate tax entity having to recalculate its FDT liability. This rule is designed to ensure that the entity does not avoid FDT by deferring the time at which a franking debit would occur in is franking account and achieves the same outcome as the deficit deferral tax that was imposed under the former imputation system.

    Last modified: 09 Aug 2016QC 16691