The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of David Bradbury

David Bradbury

Assistant Treasurer, Minister Assisting for Financial Services & Superannuation and Minister for Competition Policy & Consumer Affairs

5 March 2012 - 18 September 2013

Media Release of 28/06/2013


Preventing dividend washing

The Government will prevent dividend washing by inserting a specific integrity rule in the tax law, Assistant Treasurer David Bradbury announced today.

In developing this approach, the Government has worked with the business community, in particular with the Australian Financial Markets Association, the Australian Custodial Services Association, the Financial Services Council and the Tax Institute.

"It is important that we have an effective measure to prevent dividend washing that also avoids any unnecessary business compliance costs", said Mr Bradbury.

"Our approach will ensure that sophisticated investors are no longer able to receive two sets of franking credits on what is essentially the same parcel of shares."

"This will support investment by improving the efficiency and integrity of Australia's tax system, and ensure its long-term sustainability for all Australians."

The measure will not have an impact on typical 'mum and dad' investors, as it will only apply to investors that have franking credit tax offset entitlements in excess of $5000.

The measure has been targeted to ensure that it will not impact on ordinary trades undertaken on share markets.

Further details of the measure are attached.

A summary of submissions and the Government's response can be found on the Treasury website.

28 June 2013


Key features

The integrity rule would be inserted into the Income Tax Assessment Act 1997.

It will be targeted to the period between the ex-dividend date and the record date of a membership interest. The record date is the day on which a company closes its share register to determine which shareholders are entitled to a dividend. Under Australian Securities Exchange procedures, the ex‑dividend date comes four business days before the record date.

During this period, the rule will be activated to the extent that an entity, or an associate of an entity, disposes of the membership interest without the right to the dividend (that is, on an ex‑dividend basis), and then acquires a substantially identical membership interest with the right to the dividend (that is, on a cum-dividend basis).

When the rule is activated, the entity would not be entitled to a franking credit tax offset on the distribution on the membership interest acquired with the right to the dividend, and the amount of the franking credit on the distribution on the acquired membership interest would not be included in the assessable income of the entity.


The measure will apply from 1 July 2013.


The Government released a detailed discussion paper on this measure on 14 May 2013. The final design of the measure has been informed by submissions from industry.

Further consultation will occur on exposure draft legislation in due course.