It was possible for an investor to obtain a franking credit twice by selling shares that had been held for the statutory 45 days ex-dividend and then immediately purchasing the equivalent number of shares cum-dividend and holding those shares for 45 days. The ASX facilitates this practice by allowing large cap stocks to trade for two days cumdividend after the stocks go ex-dividend.

This procedure enabled trading in franking credits by non-resident investors who do not get the benefit of franking credits.

There will be a consultation paper issued on how to deal with this problem which may include changes to the 45 day holding period rule and possible modification of the “lastin- first-out” rules, to ensure that shares bought in the above circumstances are treated as one parcel of shares.