Franking credits
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So_Cynical
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The dividend is made up of $264.42 after tax @ 30% and the tax (franking credit) of $113.32 so really the total dividend is more like 642.16 with tax payed at 30%
$264.42 is what you get. That is the 70% after the 30% tax has been taken out. So $264.42 + $113.32 = $377.74 (what you would have got if there was no franking) or so. The registry service handling the company transactions should be able to verify it all.
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One thing to bear in mind, in case you are not already fully across this point.
If you are an Australian Resident, the Franking Credit can be a form of Tax Rebate, if your total effective marginal rate is below 30%.
You will be effectively refunded the difference in tax rates.
The ATO website explains how this is calculated, and other relevant details.
So_Cynical
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Just worked out my tax yesterday and was pleasantly surprised that my tax would be significantly reduced because of franking credits. Didn't realise this was how they worked before.. I just thought that as the company had already paid the tax, the dividend was tax free, but because I'm in the 15% tax bracket, its reducing my tax quite a bit..
Wysiwyg
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Hello jono, Are franking credits deducted from taxable income (like a tax deduction) or are franking credits deducted from tax you have to pay (like rebates)?
So_Cynical
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There like tax u have already paid, so if u get tax back u get more and if u get a tax bill its less.
Wysiwyg
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Righto.
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yep, it is minused from your tax bill.. shouldn't we get interest on it though??
jono1887,
A quick couple of points. Where you see a dividend as being fully franked divide it by 0.7 to get the gross amount. Example company pays a 70 cent dividend fully franked. Divided by 0.7 equals 100 cents grossed up.
Alternatively to calculate the imputation credit (the tax paid by the company on your behalf as a part owner) multiply the dividend by 3 and then divide by 7. Example, $0.70 ff dividend * 3 = 210 / 7 = 30
The gross amount (100 cents as per example) is what you declare in your tax return and then the kind ATO gives you a credit (30 cents as per example) for the tax already paid.
And, no, why should you receive interest on funds you didn't actually receive in your bank account?
A quick couple of points. Where you see a dividend as being fully franked divide it by 0.7 to get the gross amount. Example company pays a 70 cent dividend fully franked. Divided by 0.7 equals 100 cents grossed up.
Alternatively to calculate the imputation credit (the tax paid by the company on your behalf as a part owner) multiply the dividend by 3 and then divide by 7. Example, $0.70 ff dividend * 3 = 210 / 7 = 30
The gross amount (100 cents as per example) is what you declare in your tax return and then the kind ATO gives you a credit (30 cents as per example) for the tax already paid.
And, no, why should you receive interest on funds you didn't actually receive in your bank account?
Julia
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I might have missed someone pointing this out, but if you don't have tax to pay you will get a cheque for the franking amount from the ATO.
Many retirees get a quite decent amount in cash via this mechanism.
Many retirees get a quite decent amount in cash via this mechanism.
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So what is the before tax profit if QBE Div Statement says:
- 20% franked at 30% rate
- unfranked = $39.68
- Franked = $9.92
- Franking credit = $4.25
- Gross payment = $49.60
Can work out 39.68 + 9.92 = 49.60
Can work out $4.25 comes from ($9.92*30%/(100%-30%)
BUT if it is 80% unfranked, and this is = $39.68, shouldn't the 100% unfranked = $39.68*100/80? Which is $49.60!
Why wouldn't it be $39.68 + 9.92 + 4.25 = $53.85? Cause 20% of $53.85 = $10.77 and 30% tax on this = $3.23.
Is the statement's 20% franked at 30% wrong? Or what am I not seeing?
If you can use these numbers to show me what I'm missing, it'd be appreciated.
Thanks
johenmo
- 20% franked at 30% rate
- unfranked = $39.68
- Franked = $9.92
- Franking credit = $4.25
- Gross payment = $49.60
Can work out 39.68 + 9.92 = 49.60
Can work out $4.25 comes from ($9.92*30%/(100%-30%)
BUT if it is 80% unfranked, and this is = $39.68, shouldn't the 100% unfranked = $39.68*100/80? Which is $49.60!
Why wouldn't it be $39.68 + 9.92 + 4.25 = $53.85? Cause 20% of $53.85 = $10.77 and 30% tax on this = $3.23.
Is the statement's 20% franked at 30% wrong? Or what am I not seeing?
If you can use these numbers to show me what I'm missing, it'd be appreciated.
Thanks
johenmo
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I am with interactive brokers - A huge advantage is that I do not have to deal with about 4 letters a week from companies - they get all the rubbish/div statements and just send me a summary - anything that has to be acted on they do for me.
DOES ANYONE KNOW WHERE I CAN GET A LIST OF DIVIDENDS PAID BY ALL ASX COMPANIES [OR EVEN TOP 100] SHOWING IMPUTED CREDITS/%FRANKING ETC.
I KNOW I CAN GET IT FROM EACH INDIVIDUAL COMPANY BUT AM TRYING TO SAVE TIME
And from the above once we know a div is 100% franked can we make the calculation in the excellent posts above to claim back the imputed credits
DOES ANYONE KNOW WHERE I CAN GET A LIST OF DIVIDENDS PAID BY ALL ASX COMPANIES [OR EVEN TOP 100] SHOWING IMPUTED CREDITS/%FRANKING ETC.
I KNOW I CAN GET IT FROM EACH INDIVIDUAL COMPANY BUT AM TRYING TO SAVE TIME
And from the above once we know a div is 100% franked can we make the calculation in the excellent posts above to claim back the imputed credits
pixel
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20% of the total (paid) dividend has been taxed (franked) at 30%.
Let's see if I can paste the portion of a spreadsheet in here; the first 2 lines represent the 2 components ($9.92 = 20% of $49.60); the bottom line is the Total:
dividend frnk% frAmt gross
$39.68 0.00% $0.00 $39.68
$9.92 30.00% $4.25 $14.17
$49.60 7.89% $4.25 $53.85
Hope that clarifies it.
pixel
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That's right, Julia;
If the dividend comes from a stock held in a Superfund, and provided you have held the shares "at risk" for the minimum 45 days, the franking credits will, in most cases, be refunded in full.
see http://www.ato.gov.au/individuals/content.asp?doc=/content/42807.htm&page=10
Krusty the Klown
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pixel
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Sorry, ajjack (and all)
My mistake
I quoted a rule from 2005.Apparently, that rule no longer applies. Otherwise, the ATO would've mentioned it in their documentation for last year's tax returns:
http://www.ato.gov.au/content/downloads/IND00191833n41050609.pdf
Now you know why I pay a CPA to do all my tax returns
Further to my earlier comments about calculating franking credits:
The following spreadsheet has been updated to automatically calculate divi components, including tax.
To download an example: DiviDataWImputation.xlsx
However, since the raw data is pulled off the ASX website, hence there's no guarantee the raw data is correct, I always use the individual company's dividend advice to put into my portfolio database.
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