Franking account reconciliation review checklist for accountants

Published 23 August 2026. Last reviewed 23 August 2026. Technically reviewed by the Taxpartna tax team.

1. Confirm the opening balance

The opening franking account balance should agree to the prior year's closing balance after taking account of any subsequent adjustments that properly affect the prior period.

Check:

• prior-year franking workpaper
• any franking account tax return lodged
• amendments or ATO adjustments
• refunds processed after year end that may have special timing consequences

An unexplained opening difference should be resolved before reviewing the current year movements.

2. Review income tax and PAYG payments by payment date

Franking credits for tax payments arise according to the events specified by the imputation rules.

The practical review point is to use actual payment information rather than simply the current-year tax provision.

Check the relevant ATO account and bank records for:

• PAYG instalments paid during the year
• income tax assessment payments
• amended assessment payments
• other income tax amounts that generate a franking credit

The amount in the current-year company tax return can be useful context, but it is not a substitute for tracing the actual franking events.

3. Review income tax refunds by refund date

Tax refunds can create franking debits.

Check for:

• refunds of PAYG instalments
• refunds from amended assessments
• refunds resulting from objections or revisions
• amounts offset by the ATO against other liabilities where the franking rules treat an event as occurring

Pay particular attention to refunds received shortly after year end, because the imputation rules contain provisions that can affect the previous franking year in some circumstances.

4. Reconcile franked distributions received

A company that receives a franked distribution may receive a franking credit in its own franking account.

Review:

• dividend statements
• dates the distributions were made or received for franking purposes
• franking credits attached
• ledger income entries
• company tax return dividend disclosures

The franking account is not necessarily the same as the tax return label for franking credits. One records franking events for the account. The other is an income tax return disclosure for the relevant income year.

Where the numbers differ, make sure the file explains why rather than forcing them to agree.

5. Review franked distributions paid

For every dividend or other frankable distribution paid by the company, check:

• directors' or shareholders' documentation as relevant
• date of distribution
• cash amount
• franking percentage
• franking credit attached
• distribution statement
• franking debit recorded in the account

The review should also confirm that the dividend is legally and factually supported by the company records. The franking account is only one part of the dividend review.

6. Confirm the corporate tax rate for imputation purposes

The maximum franking credit that can be attached to a frankable distribution is based on the company's corporate tax rate for imputation purposes.

This rate is not always the same as the company's current-year income tax rate.

For a company with a prior income year, the imputation rate generally uses assumptions based on the previous year's aggregated turnover, assessable income and base rate entity passive income.

Review:

• prior-year base rate entity status
• prior-year aggregated turnover
• prior-year BREPI percentage
• whether the company existed in the prior year
• the rate actually used on dividend statements

This is one of the most common areas for a technically correct tax provision and an incorrect dividend franking calculation to coexist in the same file. Our base rate entity review checklist covers the current-year rate that this step interacts with.

7. Check the benchmark franking rule

A company that makes frankable distributions during a franking period generally needs to apply the benchmark franking rules.

Review whether:

• the benchmark franking percentage was established by the first frankable distribution in the period
• subsequent distributions used the same benchmark percentage where required
• any under-franking debit has been considered
• any over-franking tax exposure has been considered

Where different classes or unusual distributions exist, escalate the review rather than applying a simple percentage check.

8. Recalculate the closing balance

The closing balance should be a true reconciliation of the events in the franking year.

A useful schedule contains:

The running balance makes timing errors much easier to see than a year-end summary.

9. Check for a franking deficit

If the franking account is in deficit at the relevant year end, franking deficit tax may arise.

Do not clear the deficit by assuming future tax payments will fix it. Future payments occur in a later franking period unless a specific timing rule says otherwise.

Where a deficit exists, review:

• the amount of the deficit
• franking deficit tax obligations
• due dates
• the related tax offset rules
• whether any reduction of the offset needs to be considered
• whether a franking account tax return is required

10. Check post-year-end refunds and amendments

A review completed several months after year end should look at events that occurred after balance date but may affect the franking position.

This is particularly important where:

• the company received a tax refund soon after year end
• a prior assessment was amended
• PAYG instalments were varied or refunded
• an ATO account adjustment changed the assumed payment history

The reviewer should be satisfied that the workpaper is based on the actual ATO account history available at sign-off.

11. Agree disclosures across the file

Cross-check the franking workpaper against:

• financial statement tax notes where relevant
• dividend accounts
• retained earnings movements
• dividend statements
• company tax return disclosures
• franking account tax return if one is required

The amounts will not always be identical because the documents have different purposes. Any material difference should be understood and documented.

A compact reviewer checklist

• Opening balance agrees to prior-year closing balance.
• Tax payments are based on actual payment events.
• Tax refunds are included on the correct event date.
• Franked distributions received are supported by statements.
• Franked distributions paid agree to company records.
• Corporate tax rate for imputation purposes is supported.
• Benchmark franking percentage has been checked.
• Running balance has been recalculated.
• Any year-end deficit has been addressed.
• Post-year-end refund timing has been considered.
• Return disclosures have been cross-checked.

Where Taxpartna fits

Franking account review involves a large amount of cross-document checking.

Taxpartna can assist by locating tax payment and refund information in the submitted material, comparing dividend information across workpapers and returns, and flagging inconsistencies or missing support for practitioner review. It works alongside the broader tax return review checklist for accountants as tax workpaper review software.

The practitioner remains responsible for the legal treatment of each franking event, the imputation rate and any franking deficit tax consequences.

Authoritative sources

Franking conclusions depend on the imputation provisions and current ATO guidance. The following primary sources should be checked when this page is technically reviewed or materially updated.

• ATO - Franking account
• ATO - Maximum franking credits
• Federal Register of Legislation - Income Tax Assessment Act 1997

Frequently asked questions

Important information. This checklist is general information only and is intended to support professional review. It does not replace the imputation legislation, ATO guidance or the registered tax practitioner's judgement. Taxpartna is a quality assurance assistance platform and does not provide tax advice, prepare returns or give final sign-off.