The Australian tax system allows companies that pay Australian company tax to attach franking credits to dividends paid by that company. These franking credits are passed onto shareholders along with the cash component of the dividend.
The payment of Australian dividends along with their franking credit have proven to be extremely popular with investors, particularly Self Managed Superannuation Funds. Many retirees in pension funds have structured their income in retirement to include such dividends. Not only are the dividends tax free but the franking credits (proportional tax paid by the company) are refunded to the Self Managed Superannuation Fund.
The good news is that there is talk that the Government was considering to overhaul this franking credit system as the tax benefit to the recipients is clearly substantial. However, the good news is the former Assistant Treasurer Josh Frydenberg has been quoted that in spite of the lobbying, changes to the franking credit system are “not imminent”.
Mr Frydenberg was also quoted as saying “we do not have big plans for changes in this area”.
To ensure you get maximum tax benefit from franking credits feel free to contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.