The proposal would change the tax treatment of franking credits attached to distributions (otherwise known as imputation credits) from a refundable tax offset to a non-refundable tax offset. Under the proposal, franking credits would be able to reduce an individual’s personal income tax liability (including Medicare levy liability) to zero.

The proposal would apply to individuals and superannuation funds, except for recipients of Australian Government pensions and allowances with individual shareholdings, and self-managed superannuation funds with at least one member who was an Australian Government pension or allowance recipient before 28 March 2018.

The proposal would have effect from 1 July 2019.