Mr Taxman
Change the way you feel about taxes.
Get informed and discover what the taxman doesn't want you to know.
Sharing it with Australia, Mr Taxman is a regular Woman’s Day columist and TV finance commentator
  • click to visit Mr Taxman on Twitter
  • click to visit Mr Taxman on FaceBook
  • rss

Claiming dividend franking credits for tax

Dec 07, 2011

I am about to lodge my income tax return but heard that I may not be entitled to claim the imputation credits on my dividends as I bought and sold the shares during the 7 days around the ex-dividend date.  Could you please clarify if that is the case?

You might be able to claim the imputation credits but the key is the amount of dividends that you have received during the year.

Being able to claim imputation (or franking) credits against your income is an important trading strategy for most people.  Companies that pay fully franked dividends provide a better yield after-tax than those that pay unfranked dividends because you get a credit for the 30% income tax already paid. However the introduction of the“45 day holding period” rule in the late 1990s was designed to stop people trading around the dividend date, purely to get these tax-advantaged imputation credits.

I remember when this rule was first introduced.  I was a young options trader and it created pandemonium on the floor because traders and investors alike were unsure how to price it in when looking at the future income stream. 

The holding period rule states that you may not be eligible for the franking tax offset unless you continuously hold shares “at risk” for at least 45 days (or 90 days for preference shares) around, and including, the ex-dividend date.  However under the small shareholder exemption, this rule does not apply if your total franking credit entitlement is below $5,000 in a financial year.  This is roughly equivalent to receiving a fully franked dividend of $11,666 based on the current tax rate of 30% for companies. Hopefully that applies to you!

 

This article first appeared in the Sept/Oct 2011 issue of YTE Magazine www.YTEmagazine.com. Copyright Your Media Edge Pty Ltd 2011.

Tags: Personal taxShares

Author: Mr Taxman

Comments

"Can a pty company claim imputed credits back as cash if they are in a profit or loss situation Thank you"

By: ron williams on Dec 11, 2011 3:37AM

"Unfortunately companies in a loss (or nil income) situation are generally not eligible to claim a refund for any excess imputation credits. The only exceptions to the rule are companies that are life insurance companies or are tax exempt charities and deductible gift recipients. "

By: Mr Taxman on Jan 26, 2012 2:52AM

Post a New Comment

Media Availability

Are you interested in booking Mr Taxman for a speaking engagement or requesting his viewpoints for an article?

comments-rhsLatest Comments

  • "PROFESSIONAL SPELL CASTER WHO CAN HELP YOU WITH LOVE-SPELL TO GET YOUR EX LOVER BACK URGENTLY AFTER BREAKUP/DIVORCE EVEN IF YOUR SITUATION SEEMS HOPELESS! CONTACT: INFINITYLOVESPELL@GMAIL.COM IS..."

    By: Karla Dawson at Oct 15, 2019 4:26AM

    Post: Marriage

  • "PROFESSIONAL SPELL CASTER WHO CAN HELP YOU WITH LOVE-SPELL TO GET YOUR EX LOVER BACK URGENTLY AFTER BREAKUP/DIVORCE EVEN IF YOUR SITUATION SEEMS HOPELESS! CONTACT: INFINITYLOVESPELL@GMAIL.COM IS..."

    By: Karla Dawson at Oct 15, 2019 4:25AM

    Post: Marriage

  • "hello everyone here i am Jack Mark a medical doctor from United Kingdom , i want to share a great testimony of how Dr AKIOYA herbal mixture cream saves me from shame and disgrace, my penis size was..."

    By: jack mark at Oct 14, 2019 8:21PM

    Post: Today Show - Australia's unwanted cash

  • "I was cured of HIV with the used of natural herbs. My name is celina jolly and am from US. I love herbs so much. Most times, injection and drugs are just a waste of time. I was cured 8months ago..."

    By: celina jolly at Oct 14, 2019 4:35PM

    Post: Today Show - Australia's unwanted cash

  • "Knowing Kevin Petersen was the best thing that happened to me as i invested in forex and bitcoins with his and i happy to recommend him to everyone as the best trader. Email..."

    By: Hanna Rosin at Oct 13, 2019 11:20PM

    Post: Foreign currency trading