What Is A Franked Dividend?

On a recent webinar, one of our attendees has asked, “Please define the term ‘franked dividend”

Here’s our answer –

If the company is earning $100,000 in profit, you will pay 26% of tax, and you’ve got $74,000 left in the bank account. 

You can pay a dividend, and you can attach the $26,000 tax as a credit because you’ve already paid tax on that $74,000. We call it a franking credit to the dividend so that your shareholder isn’t taxed on the full amount again. 

In the shareholders’ hands, they are not paying tax on the $100,000 without any credit because the company has already paid the tax for $26,000. So, it’s basically preventing you from paying tax twice on the profit.

Watch the full webinar, ‘Solving Company Loads Division/7A Problems ’ at https://learning.benwalker.com/courses/solvingcompanyloansD7AP