Calculate your franking credit value, grossed-up dividend, and whether you'll receive a tax refund or pay extra tax.
How Franking Credits Work in Australia
Australia's dividend imputation system, introduced in 1987, prevents company profits from being taxed twice — once in the company's hands and again when paid to shareholders. When a company pays 30% corporate tax, it can attach those tax credits to dividends paid to shareholders.
The Calculation
- Franking credit = Cash dividend × (franking% / 100) × (30 / 70)
- Grossed-up dividend = Cash dividend + franking credit
- Tax on dividend = Grossed-up dividend × marginal rate
- Net tax payable = Tax on dividend − franking credit (negative = refund)
Who Benefits Most?
Low-income investors and retirees in the 0% or 19% bracket receive a net refund — their marginal rate is below 30%, so they get back more in credits than they owe in tax. High-income investors at 45% pay additional top-up tax, but still benefit from the credit offsetting part of their liability. SMSFs in pension phase pay 0% tax and receive the full 30% franking credit as a cash refund.
Frequently Asked Questions
What are franking credits?
Franking credits (also called imputation credits) represent the tax already paid by an Australian company on its profits at the 30% corporate tax rate. When that company pays a dividend, it can attach these credits to avoid shareholders being taxed twice on the same income.
How do I calculate my franking credit refund?
Gross up the dividend by adding the franking credit (cash dividend × franking % × 30/70). Include the grossed-up dividend as income and apply your marginal tax rate. If the tax payable is less than the franking credit, you get the difference as a refund.
What is a fully franked dividend?
A fully franked dividend means the company has paid full 30% corporate tax on all the profits from which the dividend was paid. The franking percentage is 100%. Partially franked means only some of the profit had tax paid on it.
Can I get a franking credit refund if I pay no tax?
Yes. In Australia, franking credits are fully refundable. If your total tax liability is less than the franking credit value, the ATO refunds the difference. This is particularly valuable for retirees in the zero tax bracket.
Do self-managed super funds benefit from franking credits?
Yes — SMSFs in accumulation phase pay 15% tax on income. Because franked dividends carry 30% credits, SMSFs receive a net refund. In pension phase (0% tax) the full 30% credit is refunded in cash.