Hi, I'm working these scenarios through and asking my accountant (who is slow in getting back to me, maybe I don't pay him enough).
But that example above assumes taxation of 0% such as a pensioner?
If you buy at 36.5c, and get a 7c FF dividend, you would effectively be selling at 29.5c and getting 7cc FF divid.
Would accounting be as such:
- record 7c loss
- 10c grossed up income with tax paid at 30%, so if your tax rate is anything about 0% or lowest rates, then you have to pay top up tax, if it's in your own company you pay nothing. (the franking credits offset the company rate).
- the 7c loss can offset any profit you make in future transactions?
Is that how people see the benefit (the loss generated on this arbitrage move)?
I'm guessing not many people are in the below $37K p.a. year bracket here.
Worst is if you do this in top bracket - where you pay 15% top up tax.
So you pay another 1.5c in tax
https://cuffelinks.com.au/franking-credits-made-easy/
