What is the nature of the dividend taken to be paid and what is the effect on the private company's franking account?

Where a deemed dividend arises, an amount is required to be included in assessable income of the shareholder (or their associate) as if it were an unfranked dividend. This amount is not, however, taken to be paid by the private company.

Further Information For more information on when loans are treated as dividends refer to the fact sheet Division 7A - loans by private companies.


Where a deemed dividend arises under Division 7A in the 2001-02 or a later income year because of an honest mistake or inadvertent omission, the Commissioner has the discretion to disregard the deemed dividend subject to conditions. See the fact sheet Division 7A - exercise of Commissioner's discretion under section 109RB to disregard the operation of Division 7A or allow a deemed dividend to be franked.

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    Last modified: 18 Aug 2010QC 17634