Issue
How can I process the dividend for Shares where the Holding Period does not meet the 45 Day Rule?
Resolution
To resolve this issue, follow the steps in the following example.
Background of the example
The SMSF acquired a single parcel of shares on 1 March 2019. On 8 April 2019, the fund received fully franked dividends on $14,000 (which included franking credits of $6,000) for the 2018–19 income year.
On 10 April 2019 the fund sold that parcel of shares.
As the SMSF had not held the shares for at least 45 days and is a fund taxpayer, the small shareholder exemption was not applicable, the SMSF failed the holding period test and cannot obtain the benefit of the franking credits.
The SMSF accountant/administrator produced the Accounting Report > Investment Income Comparison Report which highlights this parcel of shares where the 45 day holding period has not been met.
Identify the dividend transaction and process a manual adjustment
Navigate to Fund Level > Transactions > Browse Events
- Click on the Business Event, Dividend - cash dated on 8 April 2019
- Click Edit and remove the Franking Credits of $6,000
- Click on Submit
The SMSF needs to report this amount as a franked dividend amount at Label K Item 11 Income on the 2019 SMSF Annual return, but would not show the amount of franking credits at Label L. As such, the fund would not receive a franking tax offset in its assessment, i.e. it is not entitled to any part of the $6,000 franking credits.