Deferred Franking Debits

March 16th, 2014

Does the R&D refundable tax offset generate a franking debit in my franking account?

Generally, a franking debit arises in your entity’s franking account when you receive a refund of income tax which includes a refunded amount from a tax offset. However, special rules ensure that the amount of R&D tax offset refunded is not immediately reduced as a result of the entity becoming liable to franking deficit tax. The franking debit that usually arises when a refund of income tax is received, is effectively deferred in relation to refundable R&D tax offset amounts.

If a debit has been deferred for this reason, a franking credit will not arise as a result of income tax or pay as you go (PAYG) instalments your entity pays until you recover these deferred franking debits.

For more information:

  • about franking debits and an example illustrating how a corporate tax entity accounts for any deferred franking debits in current and future years, refer to Franking account tax return and instructions 2012 on the ATO website.
  • about when franking debits will arise, refer to Simplified imputation – the franking account on the ATO website.

Please consult with your general tax agent to learn how your franking account can affect a potential R&D tax claim.

Courtesy of the ATO