The Assistant Treasurer announced today that, in view of the reduction in the company tax rate from 34% to 30% for the 2001-02 and following income years, the Government will introduce legislation to amend the Income Tax Assessment Act 1936 to convert Class C franking account balances on 1 July 2001 to reflect the new company tax rate of 30%.
The conversion of franking accounts preserves the value of franking credits accumulated prior to the rate change and avoids the significant compliance costs of maintaining separate franking accounts.
Franking accounts will be converted by applying a factor of [34/66 x 70/30] to the franking account balance on 1 July 2001. The conversion rules will apply in the same way as the conversion rules to reflect the reduction in company tax rate from 36% to 34% for the 2000-01 income year.
Consistent with this conversion, all franked dividends paid on or after 1 July 2001 should carry imputation credits reflecting the 30% rate.
Canberra
25 June 2001
Contact:
Richard Wise Assistant Treasurers Office 02 6277 7360
Evan Bitmead Australian Taxation Office 02 6216 2072