The Treasury first announced it would proceed with the former government’s announced but not enacted measures for addressing dividend washing in November last year and is now seeking public comment on the draft legislation.
According to the government, dividend washing enables entities to "obtain multiple franking credit entitlements in respect of a single underlying economic interest".
An entity does this by selling an interest shortly after becoming entitled to receive a fully franked distribution as a result of the interest, and then purchases a substantially identical interest directly after that also provides entitlement to another fully franked distribution.
The draft legislation will adjust the tax law and prevent entities benefiting from the additional franking credits they receive as a result of dividend washing.
The closing date for submissions on the draft legislation is Apri 14l, with the amendments set to take effect from 1 July 2014.
