the longer you wait rio the more it will cost, page-23

Lucky,

I'm going to work this through to try and understand it.

For a fully franked dividend of $100K to have been paid to you, the company must have paid tax on $142,857 to give you that dividend.

ie $142,857 x 30% tax = $42,857 tax

$142,857 - $42,857 = $100,000

So really, we are talking about is an income to you of $142,857 of which $42,857 in tax has already been paid by the company.

However, as an individual you would have paid you tax this way on that income:

From Tax Rate
$1 0%
$6,001 15%
$30,000 30%
$75,001 40%
$150,001 45%

So you paid 30% on the first $6,000 (where you should have paid zero tax) and then you have paid 30% tax on the bit between $6K and $30K where you should only have paid 15%

So you have a credit of $6K + $3,600 = $9,600 for the bits up to $75K.

From $30K to $75K you paid 30% so you are square with the ATO on that bit.

BUT over $75K you own the ATO money because your rate is higher than the 30% the company paid.

From $75K to $150K you are on a 40% rate and from $150K and above you are on 45%.

In the scenario we have painted (assuming no other income) the bit between $75K and $142,857 you have paid 30% tax but you should have paid 40%, in other words you owe them 10% of that bit.

That means that you owe ($142,857-$75,000)*0.1=$6,785.7

But remember they owe you $9,600 so the difference is $9,600-$6,785.7=$2,814.3.

So the way I see it, you will get the $100,000 from the company and then the ATO has to fork over another $2,814.3 to you.

Let me just say I have no idea if this is right. I'm just following the logic through.

I would be happy to be corrected.

Obviously for amounts over $150K we go into the 45% bracket and then the difference is 15%.