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


Franked dividend received


Franking credit, non-cash


Other assessable income


Total taxable income


Tax on $81,200, assessed at 2015–16 rates


less franking tax offset


Tax payable*



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

End of example
    Last modified: 26 May 2016QC 48246