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Your franking tax offset

Last updated 25 May 2017

If you are paid or credited franked dividends or non-share dividends (that is, they carry franking credits for which you are entitled to claim franking tax offsets) your assessable income includes both the amount of the dividends you were paid or credited and the amount of franking credits attached to the dividends. You must include both amounts when you lodge your tax return. Tax is payable at your applicable tax rate on these amounts.

If the franking credit is included in your assessable income at U item 11, you are then entitled to a franking tax offset equal to the amount included in your income. It is not necessary for you to claim the tax offset. It will appear on your notice of assessment.

The franking tax offset can be used to reduce your tax liability from all forms of income (not just dividends), and from your taxable net capital gain. Example 4 shows you how this works.

Any excess franking tax offset amount is refunded to eligible resident individuals, after any income tax and Medicare levy liabilities have been met.

Example 5: Impact of franking tax offsets

John’s tax return (extract)

Tax return item

Value ($)

Tax payable on taxable income

2,000

less Other tax offsets

1,500

Net tax payable

500

plus Medicare levy

200

Sub-total

700

less Franking tax offset

1,000

Refund (of excess franking credits)

300

Note: Amounts are for illustrative purposes only.

End of example

Claiming your franking tax offset when you do not need to lodge a tax return

If you are eligible to claim a franking tax offset for 2016–17 but you are not otherwise required to lodge a tax return, see Refund of franking credits instructions and application for individuals 2017 (NAT 4105). If you need further information, phone 13 28 61.

QC51277