If you earn, for example $700,000 dividend income from WES shares, which are fully franked, and $300,000 franking credit, this is how your tax computation may look like. The franking credit will first be added to your assessable income to work out your total assessable income. For simplicity sake let us assume you had no other income.
Dividend 700,000 Franking credit 300,000 --------------- Total income 1,000,000 --------------- Now assume you had an average income tax rate of 40%. You would still have tax of $ 10k payable to the ATO as follows:
Income tax @ 40% 400,000 Less franking credit 300,000 ------------ Balance of tax payable 100,000 ------------
So depending on what your overall tax rate, you might still have to pay tax on your dividend. If on the other hand your overall tax rate is 20%, you might actually get a $100k refund from the ATO.
Seeing your accountant is probably a good idea to get the most tax-efficient bang for your buck.
