Question

The following information is provided by Exemplar Pty Ltd (tax rate 30%).

Date	Transaction	Amount ($)
07.07.19	Franking deficit tax relating to 2018/19	7,000
28.07.19	PAYG instalment paid for June quarter 2018/19	13,000
30.09.19	Paid final dividend from 2018/19 – 80% franked	14,000
25.10.19	PAYG instalment paid for Sep quarter 2019/20	3,500
28.10.19	Refund of net tax from 2018/19 income tax return	12,500
15.12.19	Received fully franked dividend	7,000
28.02.20	PAYG instalment paid for Dec quarter 2019/20	3,500
15.03.20	Paid interim dividend – fully franked	14,000
28.04.20	PAYG instalment paid for March quarter 2019/20	3,500
30.05.20	Paid 2019/20 Fringe benefit tax	4,600
30.06.20	Final dividend declared for 2019/20	9,000
30.06.20	PAYG instalment payable for June quarter 2019/20	3,500

The company bench mark percentage is 80%

Taxable income of the company for the 2019/20 tax year was $90,000

The franking deficit tax paid on 7 July was applied against the 2018/19 tax liability (FDT).

Required

Prepare the franking account of Exemplar Pty Ltd for the 2019/20 franking year.

Calculate the company net tax payable/refundable for 2019/20

Answer 1

Step 1

Franking account:

A franking account use to record the amount that is paid in way of tax and it can be passed on to its member as a franking credit. Each and every corporate entity that pays tax maintains a franking account in its financial statements and accounting information.

Step 2

Date	Transaction details	Debit $	Credit $
7 July 2019	Opening balance		$7,000
28 July 2019	Installment paid for June		$13,000
30 Sep 2019	80% Franked dividend		$11,200
25 Oct 2019	Installment paid for Sep quarter		$3,500
28 Oct 2019	Refund of net tax	$12,500
15 Mar 2020	Interim dividend fully franked		$14,000
28 April 2020	Paid installment of march quarter		$3,500
30 May 2020	Fringe benefit tax
30 June 2020	Final dividend declared		$9,000
30 June 2020	Installment payable for June quarter		$3,500
	Total	$12,500	$64,700
	Balance		$52,200

Net tax payable=Balance of franking account×Tax rate

$52,200×30%=$15,660

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