Dividend franking after reduction in company tax rate

[GreatPig]

If a private company has accumulated franking credits at a tax rate of 30% and then wants to issue franked dividends after the company tax rate drops to 28%, can it still frank the dividends at 30% since it has sufficient credits available?

If not, how can the shareholder (who controls the company) get access to the remaining 2% of franking credits, or do they effectively become lost (ie. trapped in the company)?

GP

 

[steveadl]

I could be wrong here, but I assume it's just tough luck to you. The company will still pay all the tax they're required to ie. 28%, and that will be franked at 100%.

ie. instead of you getting tax credits of 30c from the share, you'll only get tax credit of 28c.

 

[coastymike]

Still to be determined. This is what happened in 2001 when the company tax rate changed

http://www.ato.gov.au/businesses/content.asp?doc=/content/19811.htm

Who knows whether it will be the same or not. Wait and see

 

[GreatPig]

Coastymike,

Thanks for that. I have to say though, about the only thing I understood from that article was:

All franked dividends paid on or after 1 July 2001 should carry imputation credits reflecting a 30 per cent rate.

All that stuff about converting franking account balances went over my head.

That quote above states that shareholders could only get 30% franked dividends after July 2001, so was there no way for them to get the benefit of the surplus accumulated credits (ie. the extra 4%) after that date?

Specifically, if it had been my private company with me holding 100% of the shares, would I have lost the extra 4% of accumulated credits at that date?

GP

 

[handyandy]

If a private company has accumulated franking credits at a tax rate of 30% and then wants to issue franked dividends after the company tax rate drops to 28%, can it still frank the dividends at 30% since it has sufficient credits available?

If not, how can the shareholder (who controls the company) get access to the remaining 2% of franking credits, or do they effectively become lost (ie. trapped in the company)?

GP

CM already answered - didn't see.

Question re the article. When they mention convert did that mean you lost 4% or were there more franking credits created taking up that 4%?

The article seems to have been published prior to the passing of the law back in 2001

Cheers