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I have an SMSF which has relied heavily on Franking Credits. I have some decisions to make about re balancing my shareholding if (when) Labour gets elected What happens to the Franking Credits on retained profits that are not given to Shareholders each year ? Are these accumulated by the company and what can they do with them? Is it likely that these could be distributed to shareholders before the end of the year in the case of the Big Banks?
A: The ALP’s proposed change to the refunding in cash of excess franking credits won’t have any impact on the balance of a company’s franking account. Companies can distribute franking credits by paying a franked dividend, or can carry them forward. The balance represents the total company tax paid, less franking credits distributed to shareholders.
It is likely that ahead of the proposed effective date of 1 July, company Boards will be reviewing their franking account balances. Those with excess capital will consider the payment of a special dividend (eg. BHP), conduct an off-market buybacks (eg. Rio, BHP and possibly Woolworths), and potentially accelerate their dividend payment schedule. For example, don’t be surprised in the payment of interim dividends by ANZ, NAB and Westpac (which normally occur in July) are made in June 19.
