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Refunding excess franking credits – individuals

Individuals may be eligible for a refund of excess franking credits and there are different ways to apply for a refund.

Last updated 16 June 2024

Dividends and franking credits

Dividends paid to shareholders by Australian resident companies are taxed under a system known as imputation. This is where the tax the company pays is imputed, or attributed, to the shareholders. The tax paid by the company is allocated to shareholders as franking credits attached to the dividends they receive.

If you receive franking credits on your dividends, you need to let us know your:

  • franked amount
  • franking credit.

If you are an Australian resident, we will use this information to:

  • reduce your tax liability from all forms of income (not just dividends) and from your taxable net capital gain
  • refund any excess franking credit to you after any income tax and Medicare levy liabilities have been met.

Eligibility for a refund

You are eligible for a refund of excess franking credits if all of the following apply:

  • You receive franked dividends, on or after 1 July 2000, either directly or through a trust or partnership.
  • Your basic tax liability is less than your franking credits, after taking into account any other tax offsets you are entitled to.
  • You meet our anti-avoidance rules, which are designed to ensure everyone pays their fair share of tax.

If you have received a dividend from a New Zealand company that has paid Australian franking credits, you may be eligible to claim the Australian sourced franking credits.

Keeping records

You need to retain the dividend statements from the:

  • company that paid the franked dividend
  • trust or partnership that made the distribution containing the franking credit.

These statements should show the:

  • amount of the net dividend
  • franked amount
  • unfranked amount
  • franking credit
  • date of payment.

Anti-avoidance rules

You need to meet the anti-avoidance rules to qualify for a refund.

If your total franking credits entitlement is $5,000 or more, regardless of whether your shares are a single parcel or a portfolio made up of several parcels, you must meet the:

If your total franking credits entitlement for the income year is less than $5,000 you only need to meet the related payments rule.

You are entitled to a franking tax offset only for those shares that satisfy the relevant rule or rules. If you cannot claim a refund, don't include those franking credits in your assessable income.

Holding period rule

Total franking credits entitlement of $5,000 or more

The holding period rule generally applies to shares bought on or after 1 July 1997. To be eligible for a tax offset for the franking credit you are required to hold the shares 'at risk' for at least 45 days (90 days for preference shares) not counting the day of acquisition or disposal.

The holding period rule only needs to be satisfied once for each purchase of shares. It only applies if your total franking credit entitlement for the year of income is $5,000 or more. This is roughly equivalent to receiving a fully franked dividend of either:

  • $11,666 (for companies that are not base rate entities, with a corporate tax rate of 30%)
  • $15,000 (for companies that are base rate entities, with a corporate tax rate of 25%).

If you have more than $5,000 in franking credits from a single parcel of shares and did not satisfy the holding period rule for those franking credits, you have no entitlement to a franking tax offset for the entire franking credits. In other words, you can't restrict your claim of franking credits to a maximum of $5,000. Because you can't claim a franking tax offset, you do not include the affected franking credits in your assessable income.

If you are a partner in a partnership or a beneficiary of a trust, both you and the partnership or trust must satisfy this rule to be eligible for the refund of excess franking credits.

Total franking credits entitlement below $5,000

You don't need to meet this rule if your total franking credits entitlement for the income year is below $5,000.

Under the small shareholder exemption, you should ignore the holding period rule if all of your franking tax offset entitlements in a given year (whether received directly from a shareholding, or indirectly through a trust or partnership) are less than the maximum of $5,000. You still need to meet the related payments rule.

Related payments rule

A related payment is a payment that passes on the benefit of the franked dividend to someone else.

It applies to you if you make, are under an obligation to make, or are likely to make, a related payment. If the rule applies, and you do not hold the shares 'at risk' for a period of 45 days (90 days for preference shares), you are prevented from receiving a tax offset for the franking credits. The related payments test must be satisfied for each dividend payment and distribution. It applies to any amount of total franking credits entitlement for the year.

If you are a partner in a partnership or a beneficiary of a trust, both you and the partnership or trust must satisfy this rule to be eligible for the refund of excess franking credits.

Dividends received through a partnership or trust

You are eligible for a refund of franking credits attached to franked dividends paid to you if you are either a:

  • resident individual
  • trust or partnership, if a resident individual receives franked dividends indirectly through the trust or a partnership.

Generally, beneficiaries of a trust, who are presently entitled to a part of the trust income that is attributable to franked dividend income, and partners of a partnership, who have received franked dividend income, are entitled to a tax offset for this income.

If you are a beneficiary of a trust, the refund is:

  • available only if there is some positive amount of trust income that you are presently entitled to
  • the portion of the franking credit attached to the franked dividend equivalent to your share of the net trust income attributable to the franked dividend.

If you are a partner in a partnership, the tax offset is:

  • available even where the partnership has sustained a loss
  • the portion of the franking credit attached to the franked dividend equivalent to your interest in the partnership.

Because both the trust income and partnership income has been grossed-up to include the franking credit at the trust and partnership level, you do not need to gross up the amounts received in your own tax return.

Apply for a refund

How you apply for a refund depends on whether you have to lodge a tax return.

If you lodge a tax return

If you are required to lodge a tax return, you declare your dividend income, including unfranked amounts, franked amounts and franking credits. We then use this information to work out your refund.

You don't have to do anything else.

If you don't need to lodge a tax return

If you are not required to lodge a tax return, you can still claim a refund of your franking credits. There are different ways to claim a refund:

Online

You can apply online for a refund of your franking credits.

Lodging online allows us to complete your form using your personal details and the dividend records that have been reported to us. This will save you time and make your claim more accurate. If you don’t already have one, you will need a myGovExternal Link account linked to ATO online services.

Once you have logged into your ATO Online account, from the menu at the top of the screen select Tax, then Lodgments then Refund of franking credits.

Your personal details, and the dividend records that have been reported to us, will automatically download for you, making the process very streamlined. All you need to do is check the information, add any missing details and submit your form.

The majority of dividend records are usually available by late July so if you wait until then, most of the work will be done for you.

Once you have submitted your form, you will be emailed a receipt confirming that we have received your application. There's no need to send any franking credit documentation to us – just keep it with your other financial records.

We usually process online forms within 2 weeks.

If you want to review your online form and details at any time just login to our online services again.

Automatic refund of franking credits

During tax time 2024, to make it easier to receive your refund we will automatically refund franking credits to eligible individuals and issue them a notice of assessment. To do this we use information that is reported to us by share registries. Unless advised by us, eligible people won't need to separately apply for a refund of their franking credits.

Eligibility for an automatic refund of franking credits

You may be eligible to receive an automatic refund of franking credits if you meet all of the following:

  • you are over 60 years old on 30 June 2024
  • we have your current postal address – you can check this on ATO online services
  • you are not represented by a tax agent – you can check this on ATO online services
  • you have held the same parcel of shares for the last 2 income years
  • you were a resident for tax purposes for the whole income year
  • your total franking credit refund is not more than $5,460
  • you don’t have to lodge a tax return due to other income you've received (for example, rental or personal services income, losses or deferred losses from primary or non-primary production, partnership or business income)
  • your total dividend income is not more than $18,200 and your basic tax liability is less than your franking credits after considering any other tax offsets you may be entitled to
  • you didn’t lodge a TFN (employment) declaration during the last 2 income years
  • your Super Income Stream total taxed and untaxed amounts don’t exceed $100,000
  • you don’t have any capital gains tax.

We base eligibility on your previous year’s information and other information reported to us by banks, employers and others. Even if you received an automatic refund of franking credits in a prior year, you may not be eligible again if:

  • your circumstances have changed
  • we later receive information that means you are no longer eligible.

If this happens, we will notify you in writing that you are no longer eligible and you may need to lodge a tax return.

Who is not eligible for an automatic refund of franking credits

You are not eligible to receive an automatic refund of franking credits if you:

  • have already lodged a 2023–24 income tax return
  • have submitted a refund of franking credits application form
  • are a tax agent client.

When we are notified of a deceased person's death, we will remove them from the automatic refund of franking credits process. Any dividend income and franking credits entitlement may be included when managing the deceased person's tax affairs.

How it works

Each year, we receive information from share registries, managed funds and other third-parties in relation to dividends and investment holdings.

Once all expected information has been received for you, based on your previous share holdings, we will calculate your refund and issue you a notice of assessment. We will deposit your refund directly into your bank account.

If we don’t receive any information from share registries or other third-parties, we will not be able to provide a refund or issue a notice of assessment. You will then need to lodge, before 31 October, either an:

  • income tax return
  • application for refund of franking credits form.

If we receive some, but not all expected information, we will refund these amounts to your bank account and issue a notice of assessment. If further information is received after this time, we will refund the subsequent amounts to your bank account and issue an amended notice of assessment.

Refunds are issued from mid-July, with most finalised by August, however the timing of your refund is dependent on when the information is reported to us. If you are one of the eligible individuals, we will send you a letter or SMS in mid-June detailing the process and indicate when you should expect your refund.

If you don't want to receive an automatic refund, call 13 28 65 (Fast Key Code 2 2) to opt out. Opting out doesn’t change your eligibility to be included in a future year.

If you are not participating in the automatic program and would like to apply for a refund of your franking credits, you can do this online, over the phone or by post:

Over the phone

You can complete a paper copy of Application for refund of franking credits for individuals and then lodge your form over the phone:

  • Phone us on 13 28 65 to lodge it. Have a copy of the completed form with you.
  • At the prompts, enter your tax file number (TFN), and then press 2.
  • After you have verified your identity you will hear a series of automated questions asking you for the information on your application. Simply provide your answers by speaking into the phone.
  • At the end of the lodgment you will be given a receipt number. Write this number in the space provided on page 2 of your form.

Do not send your completed application to us – just keep it with your other financial records.

We process most forms lodged over the phone within 2 weeks.

By post

You can complete a paper Application for refund of franking credits for individuals.

  • Post your application to:

Australian Taxation Office
GPO Box 9845
[insert the name and postcode of your capital city]

For example:

Australian Taxation Office
GPO Box 9845
SYDNEY  NSW  2001

We take up to 50 business days to process claims received by post.

 


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