The Assistant Treasurer has announced a measure to combat “dividend washing”.
Dividend washing occurs when a person sells shares ex-dividend and the person selling the shares retains the right to the dividend and the franking credits. Then the same person immediately buys equivalent cum-dividend shares (which include the right to an additional dividend and franking credits). This can be done with listed shares where a special “cum-dividend” market is created for the shares for the two days after they go ex-dividend. This allows the same person to obtain the dividend and franking credits twice while only holding one set of shares.
The measure will prevent investors who have been able to engage in this practice from claiming both sets of franking credits on the one parcel of shares. Per the Assistant Treasurer’s press release on 28 June 2013, “The measure will not have an impact on typical ‘mum and dad’ investors, as it will only apply to investors that have franking credit tax offset entitlements in excess of $5000.”
Taxpayers with investments in shares shouldn’t be impacted by this new measure unless they have engaged in dividend washing which is, of course, discouraged. The measure is intended to apply from 1 July 2013.
Speak Your Mind