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Effect on tax payable

Last updated 26 May 2021

Example 4 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 $80,000. 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 4: Tax payable on dividend income

John’s tax return (extract)

Tax return item

Value $

Unfranked dividend received

200

Franked dividend received

700

Franking credit, non-cash

300

Other assessable income

80,000

Total taxable income

81,200

Tax on $81,200, assessed at 2020–21 rates

16,857

less franking tax offset

300

Tax payable (see note)

16,557

Note: This does not include any liability for the Medicare levy.

End of example

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