• Effect on tax payable

    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)

    $

    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 2015–16 rates

    17,991

    less franking tax offset

    300

    Tax payable*

    17,691

    *This does not include any liability for the Medicare levy.

    End of example
      Last modified: 31 Oct 2016QC 48246