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07 Jul 14 Dividend washing integrity rule

The ATO has published information about the dividend washing integrity rule contained in s 207-157 that applies to distributions received on or after 1 July 2013.

Dividend washing is a practice through which taxpayers seek to claim two sets of franking credits by selling shares held on the Australian Securities Exchange (ASX) and then effectively repurchasing the same parcel of shares on a special ASX trading market. The timing of this transaction occurs after the taxpayer becomes entitled to the dividend but before the official record date for dividend entitlements.

The integrity rule means that where a taxpayer receives a dividend as a result of dividend washing, they are:

  • not entitled to a tax offset for the franking credits associated with the dividend received on the equivalent parcel of shares purchased on the special ASX trading market
  • not required to include the amount of the franking credits on those shares in their assessable income.

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