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Effect on tax payable

Last updated 16 April 2020

The following example shows how the fully franked dividend of $700 and the unfranked dividend of $200 from Coals Tyer Ltd affect John's tax liability. It is assumed that John has other income of $40,000. The Medicare levy is not included in the calculation.

John's assessable income includes the franking credit in addition to the franked and unfranked dividends, and John's tax is based on this higher figure. However, he is able to use the tax already paid at the company level - the franking tax offset - to reduce the amount of tax that he has to pay on his assessment.

Example

Unfranked dividend received

$200

Franked dividend received

$700

Franking credit - non-cash

$300

Other assessable income

$40,000

Total taxable income

$41,200

Tax on $41,200 - assessed at 2005-06 rates

$8,220

less franking tax offset

$300

Tax payable

$7,920

 

End of example

QC27783