budget changes affecting shares and dividends

Removing “dividend washing” opportunities
Measures will be introduced to ensure that sophisticated investors will not be able to engage in “dividend washing” allowing them to claim two sets of franking credits on effectively the same parcel of shares.

An investor selling shares ex-dividend and then immediately buying equivalent shares which carry a right to a dividend (cum-dividend) will only be entitled to claim one set of franking credits. To achieve this, changes are proposed to the required holding period of 45 days to gain access to franking credits attached to dividends paid on a share. Changes to the “last-in first-out” rules will also be considered.

The government will consult with business to ensure the best legislative response is implemented.

The measures will only apply to investors with franking credit tax offset entitlements of more than $5,000.

Courtesy of CCH Australia