The Government has today released a discussion paper on 'dividend washing' that will form the basis of our consultation on the design, and implementation of this proposal.
This reform will protect the integrity of Australia's corporate tax system by closing a loophole that currently allows sophisticated investors to effectively claim two sets of franking credits on one parcel of shares.
The measure will ensure that when an investor sells shares ex-dividend (retaining the right to the dividend and franking credits) and then immediately buys equivalent cum-dividend shares (which include the right to an additional dividend and franking credits), that they will only be entitled to claim one set of franking credits.
The changes will be targeted to the special two-day period after a share goes ex-dividend, and will not impact typical 'mum and dad' investors with franking credit tax offset entitlements below the $5000 threshold.
The measure will improve confidence in the imputation regime by helping ensure that only the true economic owners of shares benefit from franking credits and that franking credits are only available to shareholders in proportion to their shareholdings.
These changes reflect the Government's commitment to providing a level playing field for all investors, while simultaneously protecting Australia's broader corporate tax base from erosion.
The Government welcomes public submissions on this issue. The discussion paper can be found on the Treasury website and consultation will close on 14 June 2013.