Refund of Excess Franking Tax Offset - franked dividends paid on or after 1 July 2000

Is the taxpayer entitled to a refund of an excess franking tax offset under section 67-30 of the Income Tax Assessment Act 1997 (ITAA 1997) on franked dividends paid on or after 1 July 2000?

Yes. The taxpayer is entitled to a refund of an excess franking tax offset under section 67-30 of the ITAA 1997 on franked dividends paid on or after 1 July 2000 as the franking tax offset is a refundable tax offset under section 67-25 of the ITAA 1997.

The taxpayer owns shares in a company.

Fully franked dividends were paid to the taxpayer on or after 1 July 2000. The taxpayer would be entitled to a franking tax offset with regard to those dividends.

The total of the franking tax offset exceeds the amount of tax payable by the taxpayer if they had not received that tax offset.

Section 160AQU of the Income Tax Assessment Act 1936 (ITAA 1936) provides that where an imputation credit is included in a taxpayer's assessable income, the taxpayer is entitled to a franking tax offset of that amount.

The sum of any tax offsets available to a taxpayer are limited to the amount of tax payable (section 160AD of the ITAA 1936).

However, with effect from 1 July 2000, certain franking tax offsets are subject to the refundable tax offset rules under Division 67 of the ITAA 1997.

Paragraph 67-25(1)(a) of the ITAA 1997 provides that where a tax offset is available under section 160AQU of the ITAA 1936, that tax offset is subject to the refundable tax offset rules.

While a tax offset may still be available under section 160AQU of the ITAA 1936 with regard to franked dividends paid before 1 July 2000, that tax offset is not subject to the refundable tax offset rules.

A taxpayer will be entitled to a refund of their excess franking tax offset under section 67-30 of the ITAA 1997 where: • the franked dividend is paid after 1 July 2000; • the taxpayer is entitled to a franking tax offset under section 160AQU of the ITAA 1936; and • the total of the franking tax offset exceeds the amount of income tax that the taxpayer would have had to pay if they had not got that offset, but had got all their other tax offsets.

In calculating the amount of tax payable by a taxpayer, subsection 4-10(3A) of the ITAA 1997 states that where tax offsets are subject to the refundable tax offset rules and the total of those offsets exceeds the basic income tax liability, after allowing for certain other tax offsets, the taxpayer is entitled to a refund of the excess under section 67-30 of the ITAA 1997.

The franked dividend received by the taxpayer was paid on or after 1 July 2000. The taxpayer is entitled to a franking tax offset for the amount of the imputation credit that is included in their assessable income. As the franking tax offset exceeds the tax liability of the taxpayer that would have otherwise been payable if they had not received the franking tax offset, the taxpayer is entitled to a refund of the excess franking tax offset under section 67-30 of the ITAA 1997.

Note: A taxpayer is able to claim a refund of excess imputation credits either by lodging an income tax return or, if a return is not required to be lodged, by making an application for refund of imputation credits.