Franking account tax return
The Franking account tax return 2024 applies to the 2023–24 income year. An early or late balancing corporate tax entity will need to specify the reporting period or approved substitute period on the form.
Companies, corporate limited partnerships and public trading trusts may need to lodge a franking account tax return. Find out more about Who needs to complete a Franking account tax return.
Who needs to complete a franking account tax return
Complete a Franking account tax return 2024 for all corporate tax entities and New Zealand franking companies that have:
- a liability to pay franking deficit tax (FDT)
- a liability to pay over-franking tax (OFT), or
- an obligation to notify the Commissioner of Taxation in relation to any significant variation in their benchmark franking percentage between franking periods.
If there is such a liability or notification obligation, the entity is required to complete section A and the remaining items on the Franking account tax return that are relevant to that liability or obligation.
If there is no such liability or notification obligation, there is no need to lodge this tax return.
An entity is a corporate tax entity if it is a:
- company
- corporate limited partnership
- public trading trust.
A company is a New Zealand franking company if the company:
- is a New Zealand resident company, and
- has made an election to join the Australian imputation system.
The Australian imputation rules generally apply to a New Zealand franking company in the same way as they apply to an Australian corporate tax entity. Special rules also apply, see Trans-Tasman imputation special rules.
Period boxes or specify part year or approved substitute period
The Franking account tax return 2024 applies to the 2023–24 income year.
An early or late balancing corporate tax entity is one that has the Commissioner’s permission to use an income year that ends on a date other than 30 June. These entities are granted an approved substituted accounting period (SAP) instead of an income year ending on 30 June (the standard income year).
- An early balancing corporate tax entity has its income year end before 30 June.
- A late balancing corporate tax entity has its income year end after 30 June.
A late balancing corporate tax entity that has elected to have its FDT liability determined on a 30 June basis must complete the period boxes with the dates 1 July 2023 to 30 June 2024.
For more information on SAPs, see Law and practice statement PS LA 2007/21 Substituted Accounting Periods (SAPs).
Complete the period boxes at the top of the tax return with the period covered by this tax return if the entity:
- is an early balancing corporate tax entity
- is a late balancing corporate tax entity
- ceases to be a franking entity part way through its income year
- is a New Zealand franking company, when its election to join the Australian imputation system is revoked or cancelled part way through its income year.
Example 1: late balancing corporate tax entity
MHO Ltd is a late balancing corporate tax entity with an approved substituted accounting period ending on 30 September 2024 instead of 30 June 2024.
MHO Ltd does not elect to have its FDT liability determined on a 30 June basis.
At the end of the day on 30 September 2024, MHO Ltd has a debit balance in its franking account and consequently it has a liability to pay FDT.
MHO Ltd completes the period boxes with the dates 1 October 2023 to 30 September 2024.
End of exampleLate balancing corporate tax entities that elect to have their FDT liability determined on 30 June
A late balancing corporate tax entity may choose to have its FDT liability, if any, determined on a 30 June basis, rather than at the end of its income year.
If a late balancing corporate tax entity makes this choice and it has a debit balance in its franking account on 30 June 2024, it must lodge a Franking account tax return 2024 to account for this FDT liability, on or before 31 July 2024.
It must also lodge a subsequent Franking account tax return within one month after the end of its income year if it has to:
- account for any OFT liability, or
- notify any significant variation in its benchmark franking percentage between franking periods.
The OFT liability, if any, must be paid by the last day of the month immediately following the end of the income year.
R&D entities entitled to the R&D refundable tax offset
A corporate tax entity which satisfies certain requirements may be eligible for the research and development (R&D) refundable tax offset under Division 355 of the ITAA 1997.
Special rules ensure that the amount of R&D tax offset refunded is not immediately clawed back as a result of the entity becoming liable to franking deficit tax, due to a debit normally arising in an entity’s franking account at the time of receiving a refund of income tax. The franking debit that usually arises when a refund of income tax is received is effectively deferred (deferred franking debits) in relation to refundable R&D tax offset amounts.
A corporate tax entity receiving the R&D refundable tax offset will not record any franking credit in its franking account for future PAYG instalments, or payments of income tax until any prior deferred franking debits are effectively offset by these types of franking credits. Other types of franking credits are not affected by these rules.
The following example illustrates how a corporate tax entity accounts for any deferred franking debits in current and future years.
Example 2: R&D refundable tax offset
RI Pty Ltd is an R&D entity. Over 3 years, it has the following transactions that would affect its franking account:
|
Year |
Refund of income tax |
Income tax paid |
|---|---|---|
|
1 |
$45,000 |
$0 |
|
2 |
$0 |
$30,000 |
|
3 |
$0 |
$36,000 |
Year 1
The refund of income tax in year 1 resulted from RI Pty Ltd receiving a refundable R&D tax offset. Therefore, although ordinarily a debit would arise in its franking account in year 1 for a refund of income tax, no debit will arise in year 1 and this amount will be a deferred franking debit. RI Pty Ltd must keep records that detail the calculation of a franking debit that would otherwise have arisen from the receipt of the R&D refundable tax offset (deferred franking debit).
Year 2
In year 2, RI Pty Ltd pays income tax of $30,000. This would ordinarily give rise to a credit in its franking account of $30,000. However, the entity must take into account any year 2 or prior year deferred franking debits. As RI Pty Ltd had a deferred franking debit in year 1, this needs to be taken into account prior to a credit amount arising in its franking account.
The following method statement shows the steps of how this is taken into account:
- Identify income years for which the entity received a refund of income tax before the entity paid tax.
For RI Pty Ltd, this was year 1. - Add up the part of the refund that is attributable to a tax offset that is subject to the R&D refundable tax offset rules.
For RI Pty Ltd, the amount of R&D tax offset received was $45,000. This is the amount of the deferred franking debit. - Subtract franking credits previously applied against the deferred franking debit.
RI Pty Ltd has not previously applied any franking credits against its deferred franking debit. The result after applying this step for year 2 is a deferred franking debit of $45,000. - Reduce the franking credit for year 2 by the deferred franking debit calculated in step 3.
For RI Pty Ltd, its franking credit of $30,000 is reduced to zero.
The remaining deferred franking debit (for example $15,000) will need to be taken into account when a future PAYG instalment amount or income tax is paid.
Year 3
In year 3, RI Pty Ltd pays income tax of $36,000. This would ordinarily give rise to a credit in its franking account of $36,000. However, the entity must take into account any year 3 or prior year deferred franking debit. The following method statement is again applied:
- Identify income years for which the entity received a refund of income tax before the entity paid tax.
For RI Pty Ltd, this was year 1. - Add up the part of the refund that is attributable to a tax offset that is subject to the R&D refundable tax offset rules.
For RI Pty Ltd, the amount of R&D tax offset received was $45,000. This is the amount of the deferred franking debit. - Subtract franking credits applied against the deferred franking debit.
For RI Pty Ltd, $30,000 was applied against the year 1 deferred franking debit in year 2. The result after applying this step for year 3 is a deferred franking debit of $15,000. - Reduce the franking credit for year 3 by the deferred franking debit calculated in step 3.
The franking credit of $36,000 is reduced by $15,000. As all deferred franking debits have been utilised, a franking credit of $21,000 ($36,000 − $15,000) arises in RI Pty Ltd’s franking account in year 3.
Continue to: Instructions to complete the Franking account tax return 2024