Private ruling: Benchmark franking rule
Date of advice: 30 October 2024
Published: 9 December 2024
Ruling period: Year ended 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Will the Commissioner exercise his discretion under section 203-55 of the Income Tax Assessment Act 1997 to permit you to frank a distribution at a franking percentage that differs from your benchmark franking percentage for the 2024 income year? | A1: Yes. An entity must not make a frankable distribution whose franking percentage differs from its benchmark franking percentage for the relevant franking period unless the Commissioner permits a departure. The Commissioner can only exercise his discretion in extraordinary circumstances. Having considered your circumstances and the relevant factors the Commissioner considers it appropriate to permit a departure from the benchmark franking percentage for the 2024 income year.

Relevant facts and circumstances: You recently stopped operating your business. As part of the winding up process of the business, you paid franked dividends. The dividend amount was determined by the directors so that it could leave a cash buffer for outstanding account payments while utilising all remaining franking credits. After all accounts had been finalised, a final dividend was declared and paid towards the end of the financial year. These dividends were franked at a different percentage. Some of the directors are experiencing unexpected circumstances. Given these circumstances, the directors decided to declare and pay a final dividend and wind up the company in the timeliest manner possible. You have only one class of share. All shareholders and their shareholdings have remained unchanged since incorporation. All shareholders are Australian residents. You have never previously applied for a departure from the benchmark rule.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 203-25 | Income Tax Assessment Act 1997 section 203-55