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Author: Admin | 2025-04-28
To franking credits, depending on the terms of specific tax treaties and rules applicable to their situation.You are a shareholder: To be eligible for franking credits, you need to be a shareholder in an Australian company that pays dividends with attached franking credits. This means you own shares in the company and are entitled to receive dividends.You satisfy the holding period: To claim franking credits, you typically need to hold the shares “at risk” for a certain period, known as the holding period rule. The holding period rule requires you to hold the shares for at least 45 days (excluding the day of purchase and sale) within a specified period around the ex-dividend date. This rule aims to prevent “dividend washing” or artificial transactions solely for the purpose of claiming franking credits. Fully Vs Partially Franked Dividends It’s important to note that there are both full and partially franked dividends. The difference comes down to the amount of franking credits that are attached to the dividends.Fully Franked DividendsThis is when the company has attached franking credits equal to the full amount of tax it has already paid on the profits (from which the dividend is being distributed).“In other words, the company has already paid the complete tax amount, and the franking credits represent this tax payment,” says Kelly. “Shareholders can therefore usually claim the entire franking credit to offset their own tax liability.”Pro Tip The difference between fully franked and partially franked dividends comes down to the amount of franking credits that are attached to the dividends Partially Franked DividendsPartially franked dividends is when the company has attached franking credits that represent only a portion of the tax paid on the profits or the company has not paid taxes on the entire amount of profits distributed as dividends.“As a result, the shareholders receiving partially franked dividends can still use the attached franking credits—however the credit may not cover the full amount of tax owed.” What Are Unfranked Dividends? Unfranked dividends refer to dividends that do not have any franking credits attached to them.When a company pays unfranked dividends, it means that the company has not paid any tax on the profits from which the dividends are being distributed, or it has not elected to attach franking credits to those dividends. Shareholders receiving unfranked dividends will include just the dividend amount in their individual tax returns with no tax offset to reduce their tax liability. Frequently Asked Questions (FAQs) When can you claim franking credits? Franking credits can be claimed when you include dividends with attached franking credits in your personal income tax return at the end of a financial year.However, there are rules around eligibility that need to be considered,
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