The Australian Government will modify the franking deficit tax offset rules to remove some unintended consequences, the Minister for Revenue and Assistant Treasurer, Mal Brough, announced today.
'The first modification will ensure that the franking deficit tax offset penalty will apply only for those income years in which a corporate tax entity franks a distribution during the income year for which the franking deficit arises,' Mr Brough, said.
Another modification will ensure that any franking debits arising as a result of the application of a penalty provision in the income tax law will be disregarded when determining the amount of an entity's tax offset arising from its franking deficit tax liability.
The final modification will ensure that the full franking deficit tax offset will be allowed where, broadly, events that caused excessive over franking were outside of the company's control or were unanticipated, and did not involve any broader exploitation of the imputation system.
'These changes respond to industry concerns and will remove uncertainty and practical difficulties that arise under the current law,' Mr Brough, said.
Legislation giving effect to these changes will be introduced as soon as practicable and will have effect from 1 July 2002.