Franking Credits: A Simple Guide for Tax-Exempt Groups


Franking credits can be a helpful perk in Australia’s tax system, lowering taxes on dividends for shareholders. But tax-exempt groups need to be careful not to lose out on franking credit refunds. In this blog post, let’s break down the tricky part of the law, subparagraph 207-122(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997), and see how tax-exempt groups can avoid problems.

Understanding Subparagraph 207-122(b)(i):

This part of the law is a big deal for tax-exempt groups wanting a refund on franking credits. Simply put, it says you won’t get a refund if you receive shares or other stuff instead of cash dividends and the deal has conditions that stop you from taking immediate control of those shares.

Potential Problems:

If tax-exempt groups don’t follow this rule, they risk losing the chance to get money back from franking credits. This can be a big deal financially for these groups. So, tax advisors and experts need to know about this rule to help their clients.

Guidance for Tax-Exempt Groups:

To avoid losing out on franking credit refunds, tax-exempt groups should:

1. Check the Rules:
Look closely at the rules tied to the shares or stuff you get instead of cash dividends. If these rules make it hard to take control of the shares right away, you might not get a refund.

2. Get Professional Help:
Tax laws can be confusing. It’s smart to ask experts for advice. They can give you the best guidance based on what your group needs.

3. Stay on Top of the Rules:
Keep up with the tax laws and updates from the tax office. This helps you be ready and make changes to your plans if needed.


In the end, tax-exempt groups need to be careful with the law to keep their chance at franking credit refunds. Subparagraph 207-122(b)(i) shows that tax laws can be tricky, and it’s crucial to pay attention to them.

By staying informed, getting expert advice, and looking at the rules closely, tax-exempt groups can avoid missing out on valuable franking credits. As tax laws change, learning and following the rules will be key for these groups and their advisors.