There has been a lot of recent discussion in the media about franking credits.

Franking credits are simply the balance of tax that a company has paid to the ATO.

The Shareholders / owners of the company are entitled to use these franking credits when declaring their dividends in their income tax returns.

Example:

You own shares in a company that makes a profit as follows:

Profit                  $100,000

Tax on profit       $30,000 (30%)

Profit after tax    $70,000

50% of the profit is declared as a dividend.  The dividend will be fully franked.

Therefore

Franking Credit            $15,000

Dividend                       $35,000

Your taxable income    $50,000

Tax                               $8,547

Refund                        $6,453

Without the use of franking credits, you would be in a tax payable position not refundable.   Franking credits ensure that you are not taxed twice on the dividend received.

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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