The Commissioner of Taxation has the discretion not to apply the 30% FDT offset reduction. This is if it is determined that the deficit was caused by events outside the control of the entity.
For example, an entity may pay a fully franked dividend part way through the income year on the expectation that its future quarterly PAYG instalment payment will be sufficient to bring its franking account into surplus. However, an unexpected downturn in business results in its future quarterly PAYG instalment payments being less than anticipated, leaving its franking account in deficit. It would be expected that the Commissioner would exercise his discretion to allow the full tax offset because of the unexpected circumstances.
If the Commissioner exercises the discretion, the 30% reductions in steps 1 and 2 of the method statement do not apply when working out the amount of tax offset the entity is entitled to receive for the relevant year.
Details on how to apply for the Commissioner's discretion are in Section A of the Franking account tax return instructions.
The special rules for calculating your franking deficit tax (FDT) liability if you are a late balancer.