My understanding about Franking credits is that its a after tax dividend. So say company ABC made $100 profit they pay $25 tax. The $70 is then given to the shareholder. Now if the shareholder is on 47% tax bracket $32.90 is then tax... However as $25 has already been paid in tax thats refunded.. So and extra $7.90 is payable... Meaning on $100 profit $total tax is $32.90 still or 32.9% .. Now if there was no franking credit $25 plus $32.90 =$57.90. So in effect 57.9% tax on $100 of profit... What is then wrong with franking credits??
from Senator Rennick
$482 billion in Franking credits that Treasury know nothing about it!
Here’s another ticking budget time bomb.
There is $482 billion dollars sitting in company franking accounts.
To put that in perspective that’s half the national debt of a trillion dollars, or the last five years of company tax receipts that could be refunded.
Needless to say the head of Treasury had no idea about it and the contingent liability doesn’t even sit on the balance sheet which it should.
Take a bow Peter Costello. Your idea to refund franking credits has resulted in a ticking time bomb. It would interesting to see if franking credits would fall under acquisition of property on just terms if they were to be abolished.
There is no way the federal budget can afford to refund these credits.
