If you are paid or credited fully or partly franked dividends, or non-share dividends-that is, they carry imputation credits for which you are entitled to claim franking tax offsets-your assessable income includes both the amount of the dividends you were paid or credited and the amount of imputation credits attached to the dividends. You must include both amounts when you lodge your tax return-tax is payable at your applicable tax rate on these amounts.
If the imputation credit is included in your assessable income, you can claim the imputation credit as a franking tax offset.
The franking tax offset can be used to reduce your tax liability from all forms of income, not just dividends, and from taxable net capital gains. The John Citizen example above under the heading Effect on tax payable, shows you how this works.
Prior to 1 July 2000 your franking tax offset could not create a refund. If you had any remaining franking tax offset available after your tax liability had been reduced to zero, they were disregarded and could not be refunded.
However, from 1 July 2000, excess franking tax offset is refunded to eligible resident individuals after any income tax and Medicare levy liabilities have been met.
Example
Tax payable on taxable income |
$2,000 |
Less other tax offsets |
$1,500 |
Net tax payable |
$500 |
Plus Medicare levy |
$200 |
Residual basic tax payable |
$700 |
Less: franking tax offset (due to imputation credits) |
$1,000 |
Refund (due to excess imputation credits) |
$300 |
Amounts are for illustrative purposes only
End of exampleClaiming your franking tax offset when you do not need to lodge a tax return
If you are eligible to claim a franking tax offset for 2001-02 but you are not otherwise required to lodge a tax return, you should read the publication Refund of imputation credits. If you need further information, please ring the Personal Tax Infoline on 13 28 61.