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Dividends: Franked v Unfranked

closeThis post was published 7 years 3 months 22 days ago.

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One common area of confusion seems to be the difference between franked dividends and unfranked dividends.

What is a dividend?

A dividend is the part of a company’s profit which is distributed to shareholders. If you own shares in a public company, you probably have dividend income to declare.

What does it mean by ‘franked’?

The franked portion of your dividend has already been taxed; the company has already paid tax on this profit at the 30% company tax rate. The good news for you is that you can claim an imputation credit of 30% of the franked amount (that way, the ATO is not double-dipping).

What about ‘unfranked’?

The unfranked portion of dividends has not yet been taxed. This is treated the same as any other revenue, ie. it becomes a part of your taxable income.

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Besides accounting, Christie is passionate about all things small business, lifelong learning and chocolate. She spends her leisure time blogging, making sites (like this one) and playing Sims (shhh!.... that's a secret). You can contact Christie directly at christie@lewistaxation.com.au.

Comments

  1. hi Christie,

    Can you please let me know the accounting treatment for unfranked dividend if company pays unfranked dividend (ie. Unfranked dividend payment to parent company for the amount of $ 100,000)?
    what are the other Debit and Credit accounts related to this particular transaction apart from below ledgers for taxation purposes?
    DR Dividend Account $ 100,000
    CR Bank $ 100,000

    thanks
    Dewi

  2. I am a disabled pensioner as is my wife. When I left the workforce the company I worked for arranged for a number of shares to be paid to me after negotiations with the ATO. I received a div stmt recently in which my div was
    DIv =$705.76,
    F = $494.04,
    FC = $211.73,
    UF = $211.76
    I have already submitted a form to state that I did not have sufficient income on which to pay tax even with the total income from this div payment I still would be under the tax threshold. As I have submitted the earlier form and my income from this share is so small I figure it would be too expensive to get a tax consultant not to do a a refund of Franking Credit claim. With this in mind, can you tell me how much I would get refunded.
    Sadly, I am still trying to get my head around the definition of the F, UF & FC elements.

    Can you help me, more importantly, will you help me understand each of these elements and how my statement relates to each one. A teaching point, if you will.

    I do not mind if you use hypothetical figures instead of my actual and assume the total theoretical income is not subject to further income tax.
    Others may benefit from this example.

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