The franking entity must issue a distribution statement to each member who receives a distribution, showing the amount of franking credit attached to the distribution and the extent to which it's franked.
There are no formal documentation requirements in relation to a franking entity’s decision to allocate a franking credit to a distribution. Provision of the distribution statement is evidence of the allocation.
Find out about:
- Required information
- When to provide a distribution statement
- Amending a distribution statement – including if you issued 2016–17 distributions using an old rate
Required information
The distribution statement, which the recipient uses to complete their tax return, must contain the following information:
- name of the entity making the distribution
- date on which the distribution was made
- amount of the distribution
- amount of franking credit allocated to the distribution, rounded to the nearest cent
- franking percentage for the distribution, worked out to two decimal places, rounded up if the third decimal place is five or more
- amount of any withholding tax deducted from the distribution
- name of the shareholder
- if the distribution is unfranked – a statement to that effect
- if the distribution is franked – the franked and unfranked parts of the distribution, rounded to the nearest cent
- if any or all of the unfranked amount of the distribution has been declared to be conduit foreign income – the portion declared to be conduit foreign income.
This gives the recipient enough information to meet their tax obligations for the distribution.
The amount of the franking credit is that stated in the distribution statement, unless the amount stated exceeds the maximum franking credit. In that case, the amount of the franking credit is limited to the maximum franking credit for the distribution.
If a franking entity can't provide any part of the required information on the distribution statement it can apply to us for the requirements to be varied. This might occur for example, in circumstances where the entity can't state the franking percentage (for example, due to delays in the redesign of dividend stationery and related software applications).
See also:
Additional distribution statement requirements
Different requirements apply to New Zealand companies (NZ franking company) that choose to enter the Australian imputation system.
Eligible shareholders of a listed investment company (LIC) may be entitled to a deduction for an LIC capital gain. This is only if all or some part of the dividend paid by an LIC is reasonably attributable to an LIC capital gain made by an LIC.
An LIC is required to provide the following additional information on its distribution statements:
- the share of the attributable part of the dividend
- the members who are entitled to a deduction for the attributable part of the dividend
- the amount of deduction that these members may claim.
See also:
- Trans-Tasman imputation special rules
- Income Tax Assessment Act 1997: section 115-290 – Meaning of listed investment company
- TR 2005/23 Income tax: listed investment companies
When to provide a distribution statement
Entities that are not private companies must issue a distribution statement on or before the day on which the distribution is made.
Private companies must issue a distribution statement within four months of the end of the income year in which the distribution is made.
This extended period of time for private companies means that they can decide what franking credit to allocate after the distribution is paid. However, the extension doesn't apply if the franking credits allocated to the distribution would create or increase a company’s liability to franking deficit tax.
Amending a distribution statement
In certain circumstances an entity can apply to us to vary the franking credit allocated on a distribution by amending the distribution statement. We will generally only approve a variation if the amount of franking credit on the distribution statement was not intended.
We consider:
- the number of recipients that will receive an amended distribution statement
- whether the last day has passed for lodging the recipients’ tax return for the income year in which the distribution was made
- whether the recipients’ withholding tax liability would change as a result of changing the franking credit on the distribution
- whether amending the distribution statement would result in the entity breaching the benchmark or anti-streaming rules
- whether amending the distribution statement would set a new benchmark for the franking period in which the distribution was made
- any other relevant factors.
Distributions issued using incorrect tax rate
If you have issued 2016–17 or 2017–18 distributions using the incorrect corporate tax rate for imputation purposes, you need to notify your members of the correct dividend and franking credit amounts. You can do this by sending a letter or email to your members, or a revised distribution statement.
You also need to ensure the correct amounts are reflected in your franking account and in the information that you provide to us as part of the annual distribution reporting process.
See also:
- Work out if you're a small business for the income year
- Changes to company tax rates
- Allocating franking credits
- PCG 2018/D5 Enterprise Tax Plan: small business company tax rate change: compliance and administrative approaches for the 2015–16, 2016–17 and 2017–18 income years