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
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 exampleClaiming 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 2020–21 but you are not otherwise required to lodge a tax return, see Refund of franking credits instructions and application for individuals 2021 (NAT 4105). If you need more information, phone 13 28 61.