The general rule for an individual in direct receipt of a franked distribution is the gross-up and credit approach. The approach applies to both an individual and a corporate tax entity.
Example: Individual shareholder
On 11 December 2002, Rodney receives a franked distribution of $700 with $300 franking credits attached to it. When Rodney does his tax return for the 2003 income tax year, he includes $1,000 ($700 franked distribution plus $300 franking credits) in his assessable income and is entitled to a tax offset of $300 to reduce his income tax liability.
Rodney's basic income tax liability is $200. As his tax offset exceeds his basic income tax liability Rodney is entitled to a refund of the excess, that is, $100.
End of example