How is the maximum franking credit calculated?

The maximum franking credit that may be allocated on a distribution is, broadly, the maximum amount of income tax that the corporate tax entity may pay on the profits it distributes. This means that, in practice, a corporate tax entity must not give its members credit for more tax than it has paid. This requirement is consistent with the former imputation system.

The maximum franking credit is calculated using the following formula:

Amount of the frankable distribution


Corporate tax rate
100% - Corporate tax rate

Where the corporate tax rate is 30%.

Example 2: Calculating the maximum franking credit that can be allocated to a frankable distribution

Marlyn Pty Ltd has $10,000 that it wants to distribute to its shareholders. Of this amount, $7,000 represents profits earned by Marlyn Pty Ltd. The maximum franking credit that Marlyn Pty Ltd could allocate to this frankable distribution is:



100% - 30%



    Last modified: 17 Dec 2015QC 16619