For educational purposes only. Not tax, legal, or financial advice. Tax laws change frequently. Consult a registered tax agent or CPA for your specific situation.

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    TaxKiln Australia

    Franking credit calculator

    Gross-up, offset, refund. Models the Division 207 dividend imputation system end-to-end, including refundable excess credits for resident individuals and complying super funds (Div 67).

    The dividend

    100 = fully franked.

    After tax in the shareholder's hands

    Cash dividend
    $7,000.00
    + Franking credit
    $3,000.00
    = Grossed-up dividend
    $10,000.00
    Tax at shareholder's rate (32.0%)
    $3,200.00
    − Franking offset applied
    − $3,000.00
    Net top-up tax
    $200.00
    Net cash kept from dividend
    $6,800.00
    • Gross-up: $7,000 cash + $3,000 franking credit = $10,000 assessable.
    • Tax on the grossed-up dividend ($3,200) exceeds the franking credit — top-up tax of $200 payable.

    Worked example

    A base rate entity earns $100,000 of taxable profit and pays $25,000 of company tax. It distributes the remaining $75,000 as a fully franked dividend to a sole shareholder whose only other income is a $50,000 salary.

    The franking credit attached is $75,000 × 0.25 ÷ 0.75 = $25,000. The shareholder grosses up to a $100,000assessable dividend, taking their total taxable income to $150,000. The franking credit then offsets their tax bill one-for-one against the income tax assessed on that grossed-up amount, with any excess refunded in cash.

    End result: the underlying $100,000 of profit is taxed exactly once, at the shareholder's marginal rate — which is the entire point of dividend imputation.

    Frequently asked questions

    What is a franking credit?+
    A franking credit is the shareholder's share of company tax already paid on the profits being distributed. Under the imputation system (ITAA 1997 Division 207), the shareholder grosses up the cash dividend by the franking credit, includes the grossed-up amount in assessable income, and then claims the franking credit as a refundable tax offset.
    How is the franking credit calculated?+
    Franking credit = cash dividend × (company tax rate ÷ (1 − company tax rate)) × franking percentage. For a fully franked dividend from a 30% company, every $1 of cash carries about 42.86 cents of franking credit. From a 25% base rate entity it's about 33.33 cents.
    Who gets cash refunds of excess franking credits?+
    Australian-resident individuals and complying superannuation funds. If their franking credits exceed their tax liability for the year, the excess is refunded as cash (ITAA 1997 Division 67). This is the feature that distinguishes Australian imputation from most other countries — and is the reason franked dividends are particularly valuable to retirees and pension-phase super funds. Receiving companies do NOT get a cash refund; the excess just credits their own franking account.
    Why do fully franked dividends 'feel' tax-free for some shareholders?+
    Because the company has already paid 25% or 30% tax on the underlying profit. A shareholder whose marginal rate equals the franking rate has zero further tax to pay. A shareholder on a higher marginal rate pays top-up tax on the gap; a shareholder on a lower rate (e.g. a retiree) receives a refund of the difference.
    Does this calculator account for the 45-day holding rule?+
    No. The franking credits trading rules (ITAA 1936 Pt IVA, Div 1A) deny the franking credit to shareholders who haven't held the shares 'at risk' for at least 45 days (90 for preference shares), with a small shareholder exemption for individuals with total franking credits ≤ $5,000. The calculator assumes you are entitled.

    Not tax advice. Estimates based on ITAA 1997 Division 207 (imputation), Division 202 (franking accounts), and Division 67 (refundable tax offsets). Does not model the 45-day holding rule, the small shareholder exemption, franking deficit tax, the dividend washing integrity rule, or non-resident withholding tax. For personal advice consult a registered tax agent.