{"id":"C2004A00982","name":"New Business Tax System (Franking Deficit Tax) Act 2002","slug":"new-business-tax-system-franking-deficit-tax-act-2002","collection":"act","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":"50 of 2002","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":32686,"registerId":"commonwealth-C2004A00982-current","compilationNumber":null,"startDate":"2026-04-01","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Short title [see Note 1]","content":"#### 1 Short title \\[see Note 1\\]\n\n  This Act may be cited as the New Business Tax System (Franking Deficit Tax) Act 2002.","sortOrder":0},{"sectionNumber":"2","sectionType":"section","heading":"Commencement [see Note 1]","content":"#### 2 Commencement \\[see Note 1\\]\n\n  This Act commences on the day on which it receives the Royal Assent.","sortOrder":1},{"sectionNumber":"3","sectionType":"section","heading":"Definitions","content":"#### 3 Definitions\n\n  In this Act:\n\n> corporate tax entity has the same meaning as in the Income Tax Assessment Act 1997.\n\n> franking account has the same meaning as in the Income Tax Assessment Act 1997.\n\n> franking credit has the same meaning as in the Income Tax Assessment Act 1997.\n\n> franking deficit has the same meaning as in the Income Tax Assessment Act 1997.\n\n> franking deficit tax means:\n\n    (a) franking deficit tax payable under section 205‑45 of the Income Tax Assessment Act 1997; and\n    (b) franking deficit tax payable under section 205‑25 of the Income Tax (Transitional Provisions) Act 1997.\n\n> franking entity has the same meaning as in the Income Tax Assessment Act 1997.\n\n> income year has the same meaning as in the Income Tax Assessment Tax 1997.","sortOrder":2},{"sectionNumber":"4","sectionType":"section","heading":"Imposition of tax","content":"#### 4 Imposition of tax\n\n  Franking deficit tax is imposed.","sortOrder":3},{"sectionNumber":"5","sectionType":"section","heading":"Amount of tax","content":"#### 5 Amount of tax\n\n  The amount of franking deficit tax is equal to:\n    (a) in a case where a corporate tax entity is liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the entity has a franking deficit at the end of an income year—the amount of the entity’s franking deficit at the end of the income year; and\n    (b) in a case where a corporate tax entity is liable to pay franking deficit tax under subsection 205‑45(3) of the Income Tax Assessment Act 1997 because the entity has a franking deficit immediately before it ceases to be a franking entity—the amount of the entity’s franking deficit immediately before it ceases to be a franking entity; and\n    (c) in a case where a corporate tax entity is liable to pay franking deficit tax under subsection 205‑25(2) of the Income Tax (Transitional Provisions) Act 1997 because the entity has a franking deficit at the end of 30 June in the year 2003 or a later year—the amount of the entity’s franking deficit at that time; and\n    (d) in a case where a corporate tax entity is liable to pay franking deficit tax under subsection 205‑25(3) of the Income Tax (Transitional Provisions) Act 1997 because the entity has a franking deficit immediately before it ceases to be a franking entity—the amount of the entity’s franking deficit immediately before it ceases to be a franking entity.","sortOrder":4}],"analysis":{"issue_detection":{"absurdities":[],"contradictions":[]},"flash_summary":{"complexity_score":2,"scope_assessment":{"changed":false,"description":"The Act, as drafted, simply imposes the franking deficit tax and defines its amount by reference to existing income tax provisions (ss 4–5). There are no provisions in this text that expand, restrict or alter that scope beyond the stated imposition and cross‑references; any scope effects depend on the external provisions it cites."},"complexity_factors":["Short, focused instrument with only definitions, imposition and a formulaic amount (ss 1–5).","Heavy reliance on external definitions and liability rules in the Income Tax Assessment Act 1997 and Income Tax (Transitional Provisions) Act 1997 (cross‑references increase interpretive dependence).","Calculation rule is simple (amount = franking deficit) but requires accurate franking account records maintained under the ITAA framework.","Triggers for liability are limited (year‑end deficit; deficit on cessation), reducing conditional complexity.","No discretionary powers or administrative procedures in this Act itself, shifting complexity to the broader tax administration regime."],"plain_english_summary":"Mechanically, this Act creates a tax called the franking deficit tax and requires corporate tax entities with a deficit in their franking account to pay an amount equal to that deficit (see ss 4–5; cross‑referencing the Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997). It applies when an entity has a franking deficit at the end of an income year or immediately before it ceases to be a franking entity; liability is determined and collected under the referenced income tax provisions."},"kimi_summary":{"content_quality":"ok","complexity_score":2,"scope_assessment":{"changed":false,"description":"This Act remains tightly scoped to its original purpose. It was enacted in 2002 as part of the New Business Tax System reforms to impose franking deficit tax, and it continues to do exactly that — no more, no less. The Act has not expanded beyond its narrow role of establishing the tax and setting its amount by reference to deficits calculated under other legislation."},"complexity_factors":["Extremely short: only 5 operative sections","No substantive rules of its own — entirely dependent on external legislation (Income Tax Assessment Act 1997 and Income Tax (Transitional Provisions) Act 1997)","Only 7 defined terms, all by reference to other Acts rather than standalone definitions","Simple conditional structure in section 5 (four parallel scenarios with no nesting)","No exceptions, exemptions, or administrative machinery in the Act itself","Single purpose: impose and quantify a tax, with all mechanics outsourced"],"plain_english_summary":"**What this law does:**\n\nThis Act creates a specific tax called **\"franking deficit tax\"** that certain companies and other corporate entities must pay if they over-claim tax credits (called \"franking credits\") on dividends they pay to shareholders.\n\n**How it works in simple terms:**\n\n- Australian companies can attach \"franking credits\" to dividends they pay shareholders. These credits represent tax the company has already paid, so shareholders don't pay tax twice on the same profit.\n- Companies track these credits in a \"franking account\" (like a running balance of tax credits available to pass on).\n- If a company goes into **deficit** — meaning it has promised shareholders more tax credits than it actually has available — this Act imposes a tax to recover that shortfall.\n\n**Who it affects:**\n\n- **Corporate tax entities** — primarily companies, but also some other entities that can pay franked dividends\n- The tax kicks in at two main times:\n  - At the **end of a financial year** if there's a deficit in the franking account\n  - When a company **stops being able to frank dividends** (e.g., converts to a trust or leaves the Australian tax system)\n\n**Why it matters:**\n\nThis law prevents companies from giving shareholders unfair tax advantages by claiming credits for tax they haven't actually paid. It ensures the integrity of Australia's dividend imputation system — the rules that stop double-taxation of company profits. Without this penalty, companies could game the system by over-franking dividends.\n\n**Key point:** The Act itself is short because it mainly **points to** detailed rules in other tax laws (the Income Tax Assessment Act 1997 and Transitional Provisions Act). It simply says \"this tax exists\" and \"the amount equals the deficit\" — the heavy lifting happens elsewhere."},"summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"The Act does exactly what its title suggests — it imposes franking deficit tax as part of the New Business Tax System reforms. The scope is narrow and precisely targeted: it imposes the tax and quantifies it, leaving all substantive conditions and administration to the Income Tax Assessment Act 1997. There is no evidence of scope creep or deviation from original intent."},"complexity_factors":["Relies heavily on definitions and substantive provisions in external legislation (Income Tax Assessment Act 1997 and Income Tax (Transitional Provisions) Act 1997), requiring cross-referencing to fully understand","The concept of franking accounts, franking credits, and franking deficits requires prior knowledge of Australia's dividend imputation system","Four distinct triggering scenarios for the tax liability, each tied to different subsections of external Acts","Transitional provisions referencing a specific date (30 June 2003) add a layer of historical complexity for older cases","The Act itself is structurally simple and short — complexity is primarily imported from the broader tax framework it sits within"],"plain_english_summary":"The Act levies a tax on companies (and similar corporate entities) that have attached more franking credits to dividends than their franking account holds — i.e., a franking deficit. The tax equals the dollar amount of the shortfall.\n\nIt affects corporate taxpayers (including some corporate unit trusts) when a deficit exists at year‑end or just before they stop being a franking entity. It enforces integrity of the dividend imputation system and creates direct liability for directors and tax managers."},"flash_summary_failed":{"failed":true,"reason":"Unauthenticated. Configure AI_GATEWAY_API_KEY or use a provider module. Learn more: https://ai-sdk.dev/unauthenticated-ai-gateway","source":"analysis-cron"}},"importantCases":[],"_links":{"self":"/api/acts/new-business-tax-system-franking-deficit-tax-act-2002","history":"/api/acts/new-business-tax-system-franking-deficit-tax-act-2002/history","analysis":"/api/acts/new-business-tax-system-franking-deficit-tax-act-2002/analysis","conflicts":"/api/acts/new-business-tax-system-franking-deficit-tax-act-2002/conflicts","importantCases":"/api/acts/new-business-tax-system-franking-deficit-tax-act-2002/important-cases","documents":"/api/acts/new-business-tax-system-franking-deficit-tax-act-2002/documents"}}