292 Payneham Road, Payneham SA 5070

(08) 8362 0060

(08) 8362 0061

info@owlfinancial.com.au

Grow your wealth with Franking Credits

Grow your wealth with Franking Credits

Australian investors can enjoy big tax savings with a unique system that prevents double taxation on dividends from shares – so make sure you’re not missing out on yours.

If you’re looking for ways to boost your retirement income, there’s a simple and smart strategy to get more out of your investments. The returns you’re receiving on your shares could be even higher, by making the most of franking credits.

How it works

Franking credits are tax credits that a company distributes to its shareholders with its dividends, representing tax the company has already paid.
When your shares return a profit, the company pays corporate tax on the dividends, which is currently 30%.1  You receive the dividend with a franking credit attached to it for the amount of tax the company has already paid – which you may be able to get back as a rebate. If the amount of tax you’re required to pay is less than the franking credit, the ATO will give you a refund on the difference.2

Make savings on tax

For example, your share in a company returns a dividend of $1000. The company pays 30% tax or $300, which means you receive the remainder of $700 plus a $300 franking credit. But if your marginal tax rate is 10%, you should only have paid $100 in tax.

You’re required to declare your dividend income each year on your tax return. So when you declare your taxable income of $1,000 in dividends, you’ll get back the difference between your franking credit ($300) and the tax you should have paid ($100) – a saving of $200. And if you’re not eligible to pay tax, you’ll get a refund of the entire amount of the franking credit.

Generate a retirement income stream

Now imagine this difference multiplied by all your investment dividends – and it can really start adding up. The trick is to work this to your advantage, and turn your franking credits into a secondary income for your retirement. Because your shares pay dividends on a regular basis, usually every six months, by growing your investments you can generate a secondary income stream to help boost your pension payments.

Want to know more?

Every financial situation is different and franking credits may not be a tax advantage for everyone. If your marginal tax rate is higher than corporate tax, you may even end up paying more on top of your franking credit come tax time. For advice and investment strategies tailored to your financial goals, speak to us today on 08 8362 0060

 

1.  Australian Taxation Office, Dividends and imputation, 2015.
2.  Australian Taxation Office, Refunding franking credits, 2015.

Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.

Link here to the remaining articles

  1. Stay off the ATO hit list
  2. Countdown to June 30
  3. Putting the brakes on
  4. Time to protect your income
  5. Get online at tax time – technology

 

 



Financial Advisor Adelaide

We are an award winning practice that has been providing financial advice to South Australians since 1969. We really enjoy getting to know our clients and building a relationship with them that lasts over many years. We have a diverse range of clients from mum and dad to AFL players to ASX CEOs. All of which have a diverse range of financial advice needs and very different relationships to maintain. Our clients describe a 'breath of fresh air', personable, expert and people with high integrity. Clients have also mentioned that they are not treated as a number and the advice is specific to them. Working with clients for clients.

Financial Planner Adelaide

The one most rewarding thing about being a financial planner in Adelaide is when you have been working collaboratively with a client in developing and building their goals and objectives and the come to fruition. This give both the clients and myself a real sense of achievement and to use the famous quote 'are we there yet?' and together we can say YES! There has never been a better time to look towards what you want to achieve and start a financial plan so you can get there too.

Financial Planning Adelaide

A person's financial story is like a jigsaw puzzle... "lots of pieces needing to be put into their correct places". A financial adviser can assist a client to put the pieces in the right places by having a series of simple conversations about where a they are currently situated, where they want to be and what strategies can assist them. Every client has a different financial story and goals. Each jigsaw puzzle will always be different. A good financial adviser is experienced at putting together a wide range of jigsaw puzzles. Helping a client put their own puzzle together and seeing their satisfaction is a wonderful feeling.


Barry Phillis, Chris Scriva and Owl Financial Management Pty Ltd are Authorised Representatives of GWM Adviser Services Limited Australian Financial Services Licensee Registered Office at 105-153 Miller Street North Sydney NSW 2060 and a member of the National Australia group of companies.

GENERAL ADVICE WARNING: The advice on this site may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. View Terms & Conditions >