Thanks.
I looked at some examples on franking credits and they are misleading so no wonder people get it wrong.
Let's see if I can make some statements to clear things up further.
- In your tax assessment Dividends are grossed up and added to all your other income streams.
If you received a $70 franked dividend you have to add the $30 and this becomes $100 grossed up and is $100 income.
This will increase your tax rate because of higher income.
- The total of you income determines your effective tax rate... that is the tax you actually pay which is different to your marginal rate.
Someone on $90,001 – $180,000 are both on 37% marginal
But a person on $90K has an effective tax rate of 23%
Where a person on $180k has an effective tax rate of 30%
Both are in the same bracket, same marginal rate of 37% but very different effective tax rates!
Currently $90k person can claim 7% tax back because he paid 30% tax and should only have paid 23%
Person with $180K paid 30% and his effective tax rate is 30% and there he paid exactly what he should have... no refund.
It's good to break down how this applies to the different type of taxpayers, like you did.
A few notes/corrections on the examples thought.
-fund managers who can take full advantage of the FC's by off setting the 30% fc against their 30% co tax payable.ie they get the full tax advantage
because they don't have to pay the 30% co tax rate depending on fc's refunded...
There is no offsetting of anything or taking advantage of anything. Tax was paid already by the company ( as with PAYG ).
But the income or dividend should be taxed in the hands of the taxpayer and taxpayer rates. not company rates.
Therefore IF they have to pay 30% and the 30% has already been payed then they don't have to pay any MORE.
The tax was paid. It was paid at 30%.... there is no tax advantage because of dividend imputation.
-when high income earners on 45% receive the fully franked dividend they can off set their income tax and pay 15% income tax not the 45% income tax.
Under morrisons new tax,those earning between $45,000 and by memory $180,000 will get the full benefit of the FC because they can off set the 30% tax paid fc against their 30% income tax under labors fc policy..
No....
1. They will pay more than 15%
- grossed up dividend is added to income and tax rate determined by overall income.... you claim/pay the difference between tax rate paid by company on you behalf and your individual effective tax rate.
IF you were on an effective rate of 35% then you pay tax of the full dividend amount at 35%.... 30% ALREADY paid + 5% you have to add.
It's misleading to say you only pay 5%.... the other 30% is also YOUR money.... it was just paid on your behalf... just like tax withheld on other income sources which is taxed in the hands of the taxpayer.
2. No one pays 45% income tax ... .the highest bracket is 45%.... even someone on $500K will only pay about 42% even after including medicare etc.
-Then we come to the bottom feeders,the smsf's that pay no tax on revenues unlike all the above because/ justified because we r retired ,saved for our retirement and pay our own way by not receiving the aged pension.We get no benefit from the ' tax paid' franking credit,unlike all above.
I don't get what this has to do with franking credits at all!!
Sounds like this is about tax rates and concessions.
Currently in pension mode you would pay 0% tax and therefore the 30% tax paid was too much and you can claim that back because of concessions.
But the same goes for CGT too, so what are people on about FC ??
Are they going to target CGT in pension mode next?
So really, it is about changing pension fund concessions.
That's really crappy. You cannot go and change rules when people spent time and effort planning and working to be self sufficient... such bullshit.
I'm 38 so still some way off, but I was contributing extra to super...not so sure I should if these people just keep changing the rules.
There was reasons for making the tax rate 0% when in pension mode. Not about to debate that.
It just has NOTHING todo with franking credits....they are seperate issues.
One avoids double taxation by vesting the income in the hands of the taxpayer.
The other is about tax rates and concession rules.
- The dh labor fools say we can't afford to continue to pay the $6b fc's to smsf's.Do the fools understand they r saying they can afford to give the fc advantage to fund managers and high income earners but not smsf's.
What misleading sensational narrative.
They are not paying the SMSF.... it was not their money to begin with!
It was an overpayment in tax and they need to refund the overpayment.
SMSF should be treated the same as other funds for sure.
I'm not debating the 0% rates and concessions here, that's a whole other debate.
(20min delay)