No | Leave J, K and L blank. Go to M. |
Yes | Read on. |
Dividends and non-share dividends from Australian entities may carry franking credits. We call such dividends franked dividends. Franking credits reflect tax the company has paid.
Dividends and non-share dividends with no franking credits are called unfranked dividends.
An SMSF's assessable income includes:
- unfranked dividends (include these at J Unfranked dividend amount)
- franked dividends (include these at K Franked dividend amount)
- franking credits (include these at L Dividend franking credit if the SMSF is entitled to a corresponding tax offset).
Include non-share dividends at J, K and L in the same way as dividends. For more information about non-share dividends see Guide to the debt and equity tests.
If the SMSF was paid a dividend from a private company, you must establish whether the dividend is non-arm's length income. If the SMSF is a complying SMSF and it is non-arm's length income, include the dividend and franking credit at U1 Net non-arm's length private company dividends instead of at J, K or L.
Example: Dividends and franking credits
In 2020–21, SMSF JKL owned shares in an Australian publicly listed company. The dividend statement shows that the SMSF received $21,000 dividends and $9,000 Australian franking credits. SMSF JKL is a complying SMSF.
SMSF JKL reports:
J Unfranked dividend amount $0
K Franked dividend amount $21,000
L Dividend franking credit $9,000
E1 Complying fund’s franking credits tax offset in section D $9,000
End of exampleJ Unfranked dividend amount
Was the SMSF paid unfranked dividends, including unfranked non-share dividends?
No | Leave J blank. Go to K. |
Yes | Read on. |
Write at J the total amount of unfranked dividends, and unfranked non-share dividends, that were paid to the SMSF. The amount at J should not be reduced by any loss or outgoing related to the income.
If you include an amount at J that is exempt current pension income, also include it at Y Exempt current pension income. Do not include unfranked dividends:
- that are a share of net income from a trust (include these at M Gross trust distributions)
- that are part of a distribution from a
- partnership (include these at I Gross distribution from partnerships)
- pooled development fund (do not include the distribution anywhere in the SMSF's assessable income as it is exempt income but take it into account when calculating M1 Tax losses deducted in section C)
- from a New Zealand franking company (include these at D1 Gross foreign income)
- on which family trust distribution tax has been paid
- that are non-arm's length income of a complying SMSF (include these at U1 Net non-arm's length private company dividends).
K Franked dividend amount
Was the SMSF paid franked dividends, including franked non-share dividends?
No | Leave K blank. Go to L. |
Yes | Read on. |
Write at K the total amount of franked dividends, and franked non-share dividends, that were paid to the SMSF. The amount at K should not be reduced by any loss or outgoing related to the income.
If you include an amount at K that is exempt current pension income, also include it at Y Exempt current pension income.
Do not include:
- franking credits (include these at L Dividend franking credit)
- franked dividends that are a share of net income from a trust (include these at M Gross trust distributions)
- franked dividends that are part of a distribution from a partnership (include these at I Gross distribution from partnerships)
- franked dividends that are part of a distribution from a pooled development fund (unless you have elected to include the franked dividends in the SMSF's assessable income)
- franked dividends from a New Zealand franking company (include these at D1 Gross foreign income)
- franked dividends on which family trust distribution tax has been paid
- franked dividends that are non-arm's length income of a complying SMSF (include these at U1 Net non-arm's length private company dividends).
L Dividend franking credit
Were franking credits attached to dividends paid to the SMSF for which it is entitled to a franking credits tax offset?
No | Leave L blank. Go to M. |
Yes | Read on. |
Write at L the total amount of the franking credits:
- attached to franked dividends, and franked non-share dividends, paid to the SMSF in 2020–21, and
- for which the SMSF is entitled to a franking credits tax offset (see Entitlement to franking credits tax offset).
In addition to including a franking credit at L, you must also include it at either:
- E1 Complying fund’s franking credits tax offset in section D if the SMSF is a complying fund
- C2 Rebates and tax offsets in section D if the SMSF is a non-complying fund.
If you include an amount at L that is exempt current pension income, also include it at Y Exempt current pension income.
The amount at L should not be reduced by any loss or outgoing related to the income.
Do not include:
- the dividend that the franking credit is attached to (include it at K Franked dividend amount)
- franking credits where the SMSF is not entitled to a franking credits tax offset (do not include these anywhere on the SMSF annual return)
- franking credits that are part of a share of net income from a trust (include these at M Gross trust distributions)
- franking credits that are part of a distribution from a partnership (include these at I Gross distribution from partnerships)
- Australian franking credits from a New Zealand franking company (include these at E Australian franking credits from a New Zealand company)
- franking credits that are part of a distribution from a pooled development fund (unless you have elected to include franked dividends and thus the franking credits in the SMSF's assessable income)
- franking credits on which family trust distribution tax has been paid
- franking credits attached to a dividend that is non-arm's length income of a complying SMSF (include these at U1 Net non-arm's length private company dividends).
Continue to: M Gross trust distributions