The 45-day rule, tracked before you trade.
We surface a parcel's holding-period position before a sale is placed. Most tracking tools treat this rule as an afterthought.
The problem
Most tools record dividends after the fact. By the time a franking credit appears in a year-end report, the question that decided whether it was ever claimable, namely how long the parcel was held at risk around the ex-dividend date, has already been answered by trades made months earlier.
The 45-day holding period rule (excluding the day of acquisition and the day of disposal) determines whether franking credits attached to a dividend are actually available to the fund. Getting it wrong does not produce an error message. It produces a return that claims credits that were never available, corrected later. Usually by an accountant, at the fund's cost.
How we handle it
- Parcel-level LIFO disposal tracing. A sale is traced against acquisition parcels in last-in-first-out order, the ordering the holding-period rules require. Never against an average position.
- A day count that matches the statute. The at-risk count excludes the day of acquisition and the day of disposal, per the rule. These are the two days most hand-counts include by mistake.
- At-risk parcels surfaced before the trade. The pre-trade simulator shows which parcels would fall short of the holding period if sold on a given date, and the earliest date the position changes. It reports the position; the decision stays with the trustee.
- Related payments and qualified-person position flagged. Where a related payment arrangement or the qualified-person tests change the picture, the calculation flags it for review with the provision referenced.
These are information reports against the published rules. They do not determine the fund's entitlement, and the figures depend on the completeness of the trade history the fund provides.
The SMSF catch
The small-shareholder exemption that lets individual taxpayers skip the 45-day rule does not apply to SMSFs. The boundary is the entity, not a dollar threshold, so a fund cannot rely on it at any size.
Legislative basis
Income Tax Assessment Act 1936 (Cth): s 160APHO (the 45-day holding period rule), s 160APHI (last-in-first-out disposal tracing), s 160APHT (the small-shareholder exemption, unavailable to SMSFs). Income Tax Assessment Act 1997 (Cth): Division 207 (franking credit gross-up and tax offset). Every calculation in the product cites the provision it applies.
The day count itself, worked through on a calendar: the 45-day holding period rule, counted day by day.
General information only. Not a licensed financial service.
Join the free beta