Most of u people are more knowledgeable about shares then me, and I would like to kno if the following is another option for companies to circumvent the cancellation franking cash refund.
This article is from the NAB: BONUS SHARE PLAN (BSP)Australian resident shareholders.
Generally, the bonus shares are not treated as a dividend for Australian tax purposes. Consequently, franking credits do not attach to these bonus shares and no amount should form part of your taxable income.
In certain circumstances, bonus shares are treated as a dividend to which franking credits attach (for Australian tax purposes). In these cases, an amount equal to the dividend and any attached franking credits would normally form part of your Australian taxable income. However, you're generally entitled to a tax rebate based on the franking credits attached to the dividend.
The Commissioner of Taxation (Commissioner) may also determine that the bonus shares are treated as a dividend to which no franking credits attach. If the Commissioner makes such a determination, an amount equal to the dividend normally forms part of your Australian taxable income.
The precise circumstances where the Commissioner might make such a determination are unclear. However, the Explanatory Memorandum to the Federal legislation that introduced the bonus share provisions has some clues. It indicates that the Commissioner should generally not make a determination where bonus shares are provided in the ordinary course of business by a publicly listed company as an alternative to franked dividends, unless the shareholder who receives the bonus shares engages in a course of conduct which provides an equivalent to the cash dividend in a more tax effective form. An example of this? Consistently selling the bonus shares tax free after receiving them where they acquired their original shares prior to 20 September 1985.
Further, the Commissioner cannot make such a determination where shareholders who don't participate in the BSP receive fully franked dividends.
U guys might be able to clarify what this all means! My understanding is that bonus share are only treated as being franked, if they are substituted for franked dividends. Classic case is in a DRP.
