There’s no place like home for non-profit investors

There’s no place like home for non-profit investors

Australian investors are well known for their home bias when it comes to investing in equities, despite the local bourse only making up around two percent of the world’s market capitalisation.

There are certainly some good reasons for this trend. The Australian economy has proved resilient during downturns, weathering the dot com bubble in 2000 due to a smaller than average technology sector, and outperforming other nations during the Global Financial Crisis and Covid-19 pandemic as a result of its strong commodities exports.

Another major drawcard for local investors is franking credits (also known as imputation credits). This is a type of tax credit that allows taxes paid by companies to be passed on to shareholders to avoid double taxation. These franking credits can be used to reduce income tax payable on dividend income or can potentially be received as a tax refund.

Tax concessions for the not-for-profit sector

Currently, entities that are endorsed by the ATO as income tax exempt entities and deductible gift recipients (DGRs) can apply for a refund of franking credits.

For example, Uniting Financial Services’ Ethical Managed Funds range, which have direct or indirect exposures to Australian equity investments, pass on franking credits to unitholders as part of their quarterly distributions as received by the Fund.

If eligible, your organisation may effectively receive a fifth cash flow each year (in addition to the quarterly distributions of income from investments in UFS managed funds) in the form of a franking credit refund from the Australian Taxation Office. Information about franking credits can be found in the tax statements received, along with your distribution statements.

Preparing for tax time

If your organisation is applying for a franking credit refund for the first time, you will need to contact the ATO on 1300 130 248 to request the form Application for Refund of Franking Credits – Endorsed Income Tax Exempt Entities and Deductible Gift Recipients (NAT 4131). This, along with helpful tips on how to complete the form, is available on the ATO website.

Once you have completed this process, the ATO will send you a personalised version of the (NAT 4131) form at the end of each financial year. This must be completed with details regarding the dividend income received, as per your organisation’s tax statement.

Get the right advice

As taxation is a specialist area, we recommend seeking advice on how to manage investments tax-effectively.

There are also other factors your organisation must consider beyond your taxation position when making a decision on the right assets to invest in. These include your risk appetite, whether the investment is for a short or long-term goal and whether your portfolio will be adequately diversified across different geographies, asset classes and sectors.

More information

If you would like more information on the process to undertake to claim a refund of franking credits, Uniting Financial Services has compiled a process overview document. To receive your copy, please contact

Ian Perry, Chief Financial Officer, Uniting Financial Services


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