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1、Franking Deficits Tax s205-45 ChenTax IssuesFor the year ended 30 June 2013 Perfect Pty Ltd has a Deficit Franking Account balance of $12,000and Total Franking Credits of $220,000Deficit Franking Account balance of $12,000 Total Franking Credits of $220,000Tax rules-Franking deficit tax applies wher

2、e an entity has a deficit in its franking account at the end of an e year. s205-45(2) ITAA97 -Franking deficit tax is equal to the amount of the deficit. s5 Business Tax System (Franking Deficit Tax) Act20021st Tax consequencesPerfect Pty Ltd will have to pay $12,000 franking deficit tax on the 30 J

3、une 2013 closing balance of its franking account. Deficit Franking Account balance of $12,000 Total Franking Credits of $220,000Tax rules-If the entity incurs a liability to pay franking deficit tax under s205-45, entity obtains a credit for the tax in its franking account. s205-15 ITAA97Actually th

4、e franking deficits tax is treated as a pre-payment of tax. 2nd Tax consequencesA Franking credit of $12,000 arises immediately on the franking deficit tax liability eliminates the franking deficit. No franking deficits will be carried forward.Deficit Franking Account balance of $12,000 Total Franki

5、ng Credits of $220,000Tax rulesThe entity is entitled to a tax offset for any franking deficit tax it is required to pay at the end of an e year, which reduces the companys e tax liability for the year. Where the entitys franking deficit tax liability is greater than 10% of the total franking credit

6、s that arise in its franking account for the year, the tax offset is reduced by 30%. s205-70 ITAA97The rule operates as a penalty to prevent substantial over-franking. 3rd Tax consequences$220,000 * 10% = $22,000 $12,000 No reduction on tax offsetEntity is entitled to claim a tax offset of $12,000.D

7、eficit Franking Account balance of $25,000 (instead of $12,000) Total Franking Credits of $220,000Tax consequences-Perfect Pty Ltd will have to pay $25,000 franking deficit tax on the 30 June 2013 closing balance of its franking account.-A Franking credit of $25,000 in franking accounts.$220,000 * 10% = $22,000 $25,000 Entity loses the entitlement to offset 30% of the amount of the franking deficit tax. 30% * $25,000 = $7,500 (a p