Franking Credits Calculator (Australia)
Calculate the grossed‑up value of your franked dividends, franking credit tax offset and after‑tax income for Australian shareholders.
Franking Credits & After‑Tax Income Calculator
100% = fully franked, 0% = unfranked.
Common rates: 30% (large companies), 25% (base rate entities).
Include Medicare levy if you want total effective rate.
Results
With a marginal tax rate of 34.5%, you pay $45.00 of extra tax on this franked dividend and keep $655.00 after tax.
How the franking credits calculator works
Australia uses a dividend imputation system. When a company pays tax on its profits and then distributes those profits as dividends, it can attach franking credits (also called imputation credits) to show the tax already paid.
As a shareholder, you must include both the cash dividend and the franking credit in your taxable income, but you receive a tax offset equal to the franking credit. If your tax on the dividend is less than the franking credit, the excess is generally refundable.
Key formulas used
1. Franking credit on the franked portion
Let:
D= cash dividend received-
f= franking percentage (e.g. 100% = 1.0, 50% = 0.5) c= company tax rate (e.g. 30% = 0.30)
Franked cash component: \( D_f = D \times f \)
Franking credit:
\[ \text{Franking credit} = D_f \times \frac{c}{1 - c} \]
2. Grossed‑up dividend (assessable income)
\[ \text{Grossed‑up dividend} = D_f + \text{Franking credit} \]
Total assessable income from this holding:
\[ \text{Assessable income} = D + \text{Franking credit} \]
(Unfranked portion is just taxed as ordinary income with no credit.)
3. Tax, offset and after‑tax income
Let m = your marginal tax rate (including
Medicare levy if you choose).
Tax on grossed‑up dividend:
\[ \text{Tax on dividend} = \text{Grossed‑up dividend} \times m \]
Net tax payable on this dividend:
\[ \text{Net tax} = \text{Tax on dividend} - \text{Franking credit} \]
After‑tax cash:
\[ \text{After‑tax cash} = D - \max(\text{Net tax}, 0) \]
Refundable franking credits (if credits exceed tax on the dividend):
\[ \text{Refund} = \max(\text{Franking credit} - \text{Tax on dividend}, 0) \]
Worked example: fully franked dividend
Suppose you receive a $700 fully franked dividend from a company that pays tax at 30%, and your marginal tax rate (including Medicare) is 34.5%.
-
Franking credit
\[ \text{Franking credit} = 700 \times \frac{0.30}{1 - 0.30} = 700 \times \frac{0.30}{0.70} = 700 \times 0.428571... \approx 300 \] -
Grossed‑up dividend
\[ \text{Grossed‑up dividend} = 700 + 300 = 1{,}000 \] -
Tax on grossed‑up dividend
\[ \text{Tax} = 1{,}000 \times 0.345 = 345 \] -
Apply franking credit as tax offset
\[ \text{Net tax} = 345 - 300 = 45 \] -
After‑tax cash
\[ \text{After‑tax cash} = 700 - 45 = 655 \]
The calculator reproduces this logic and also shows whether you would receive a refund of excess franking credits if your marginal tax rate is lower than the company rate.
Understanding franking credits & imputation credits
Before dividend imputation was introduced, company profits could be taxed twice: once in the company and again in the hands of shareholders. The Australian imputation system avoids this double taxation by allowing shareholders to impute (or attribute) the company tax already paid.
- Company level: The company pays income tax on its profits at the corporate tax rate.
- Shareholder level: When those profits are paid out as dividends, the company can attach franking credits representing the tax already paid.
- Tax return: You include the grossed‑up dividend in your assessable income and claim the franking credit as a tax offset.
If your personal tax rate is higher than the company rate, you pay a top‑up tax. If it is lower, you may receive a refund of the excess franking credits.
Fully franked vs partially franked vs unfranked
- Fully franked dividend: Franked at the company’s full franking rate (often 30% or 25%). The maximum franking credit is attached.
- Partially franked dividend: Only part of the dividend has franking credits attached (e.g. 50% franked). The calculator handles this via the franking percentage field.
- Unfranked dividend: No franking credits. The dividend is taxed as ordinary income with no tax offset.
Common questions about franking credits (FAQs)
Do I always get a refund if my tax rate is lower than the company rate?
Not necessarily. Your franking credits are combined with your other income and tax offsets. If, after taking everything into account, your total tax payable is less than your total franking credits, the excess is generally refundable. This is common for retirees with modest taxable income and for some low‑income investors.
What is the holding period rule?
To be entitled to franking credits, you usually must hold the shares “at risk” for at least 45 days (90 days for preference shares), not counting the day of acquisition or disposal. There are also rules for related payments and dividend washing. If you do not satisfy these rules, you may not be able to claim the franking credits.
How do franking credits work in a super fund?
Superannuation funds also receive franking credits on franked dividends. In accumulation phase, the fund’s tax rate is generally 15%, so franking credits can reduce or eliminate tax on investment income. In pension phase, the effective tax rate may be 0% on some or all of the fund’s earnings, so excess franking credits can often be refunded to the fund.
Are franking credits the same as tax‑free income?
No. Franking credits are tax offsets, not tax‑free income. You must still include the grossed‑up dividend (cash plus credit) in your assessable income. The benefit is that you receive a credit for the company tax already paid, so you are not taxed twice on the same profit.
When should I use this calculator?
Use this tool when you want to:
- Estimate the tax impact of a franked dividend you have received or expect to receive.
- Compare fully franked vs unfranked investments.
- Understand how changes in your marginal tax rate affect your after‑tax dividend income.
Important notes & disclaimer
- This calculator is a general educational tool for Australian franking credits.
- It assumes a single marginal tax rate applied to the grossed‑up dividend and ignores thresholds, offsets and other income.
- Actual tax outcomes depend on your full situation, including other income, deductions, offsets and residency status.
- Tax law and rates change over time. Always check current ATO guidance or speak with a registered tax agent or financial adviser for personal advice.