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Dividends: Franked v Unfranked

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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

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