Qld unis lose millions in ATO franking credit backflip

Queensland universities are poorer to the tune of about $160 million following the culmination of a two-year stoush with the Australian Taxation Office that ended with a costly backflip on a key decision.

The state’s universities have likely lost $160m thanks to an almost two-year stoush over a franking credit refund initially approved by the tax office – before it reversed its decision.

The seven Queensland-based universities collectively posted a $13.63m loss last year and only two managed a profit. It came after they recorded a combined $564.7m loss in 2022.

In August 2021, as part of a one-off transaction, each university received an “in-specie dividend” from Education Australia, which included franking credits worth $22.8m.

Around a year later, the Australian Taxation Office had assessed and approved the refund for each institution.

But shortly after, the ATO advised universities that it was reviewing whether the tertiary bodies were eligible to receive a refund under the Income Tax Assessment Act.

In late 2023, the ATO ruled the seven Queensland universities and 31 other universities across the country were not eligible to receive the franking credit refund.

The seven state-based universities have each sought legal advice, maintained the belief that they are entitled to the refund, and lodged formal objections with the ATO. All are still waiting for a response, but the outlook is not hopeful.

University of Queensland campus at St Lucia. Picture Lachie Millard

“Due to the doubt about the recoverability of this debt, a $22.8m impairment loss was recognised in last year’s financial statements,” a University of Queensland spokeswoman said.

The Sunday Mail understands the universities have not had previous issues with the ATO regarding franking credit refunds.

The universities wrote in their annual reports that they had independent legal advice which supported the view that they were entitled to receive the franking credit refunds.

The Sunday Mail put detailed questions to the ATO.

“The ATO cannot comment on the tax affairs of any individual or entity due to our obligations of confidentiality and privacy,” a spokeswoman said.

However, the ATO did issue an alert in December 2023 regarding legislated restrictions on claiming franking credits on dividends received as property which is subject to restrictions.

It said it was “reviewing arrangements involving franked distributions in the form of property other than money (in-specie distributions) that are made to income tax exempt entities including registered charities, deductible gift recipients, scientific institutions and public educational institutions”.