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Option to have franking deficit tax liability determined at 30 June

Last updated 31 July 2023

If you're eligible, you may haves the option to have your franking deficit tax (FDT liability determined at 30 June.

General rule

Generally, a late balancing corporate tax entity will have its liability to FDT determined at the end of its income year, or when it ceases to be a franking entity.

Option for FDT liability to be determined on a 30 June basis

However, there is an option for certain late balancing corporate tax entities to have their FDT liability determined on a 30 June basis rather than at the end of their income year. This choice is only available if:

  • the entity was in existence at the end of 30 June 2002
  • the entity's 2001–02 income year ended after 30 June 2002
  • the entity made a valid election on or before 30 June in 2003 and every year thereafter, to have its FDT liability determined on a 30 June basis. This is even if its franking account had a deficit balance at 30 June.

To be valid, your election must be made in writing on or before 30 June. The entity must not have previously determined its FDT liability at the end of its income year (that is, not on a 30 June basis). You do not need to lodge your election with us.

If a late balancing corporate tax entity does not make a valid election it will have its FDT liability determined at the end of its income year. It will not be allowed to subsequently choose the option of having its FDT liability determined on a 30 June basis in later income years.

Example: Company did not elect to balance early

Tan Ltd is a public company whose 2012–13 income year ends on 30 September 2013 in lieu of 30 June 2013. Tan Ltd finds that on 30 June 2013, it has a debit balance in its franking account of $15,000.

Tan Ltd did not make a valid election to have its FDT liability determined on 30 June 2013. This means that any FDT liability it may have will now be determined at the end of its income year, which is 30 September 2013.

Because Tan Ltd did not make a valid election for its FDT liability to be determined on a 30 June basis, Tan Ltd will never be allowed to make this election in future income years. They are now locked into having any future FDT liability determined at the end of its income year.

End of example

Refunds received within 3 months of 30 June

If a late balancing corporate tax entity chooses 30 June to determine its FDT liability and receives an income tax refund within 3 months after 30 June in that year, the refund is taken to have been received immediately before 30 June if:

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

As a result, the corporate tax entity will need to recalculate its FDT liability. This rule ensures that the entity does not avoid FDT by deferring the time at which a franking debit would occur in its account.

QC50648