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Franking Credits

That little something extra with your dividends

Franking credits have been in the news a lot lately. But what are they?

Many Australian companies make a profit (hopefully). As a shareholder you are a part owner of the company and you are entitled to a part of that profit. This is given to you as a dividend. Sometimes dividends come with a note to the tax office that says that some or all of the tax has been paid in Australia.

This is a Franking Credit. It's so that profits are not taxed twice.

You can deduct this credit on your tax return, thus making the dividends even more valuable.

Here's an article from Morningstar that covers Franking credits in detail.

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