Calculate Assessable Income with a 50% Franked Dividend of $500

[JimmyJockstrap]

you receive a 50% franked dividend of $500. corporate tax rate is 30%.

what is your assessable income in relation to this?

from my understanding.

it would be 500/.85 or something like that.

u pretend u receive an unfranked dividend and just go off ur personal tax rate.

 

[HallsofIvy]

"An arrangement in Australia that eliminates the double taxation of dividends. Dividends are dispersed with tax imputations attached to them. The shareholder is able to reduce the tax paid on the dividend by an amount equal to the tax imputation credits. Basically, taxation of dividends has been partially paid by the company issuing the dividend.

This concept is best illustrated by an example. Suppose you receive a franked dividend of $100. Assume the before-tax value of this dividend is $125 (this will depend on the company's rate of taxation). In other words, the company has to generate $125 of pre-tax profit to be able to disperse the dividend.

If your marginal tax rate is 30%, you will owe $12.50 in taxes on the franked dividend (($100) -($125 * (1-.3))= $12.5). If the dividend is unfranked, you will owe $30 on the $100 dividend ($100 * (1-.7)= $30. Essentially, the company pays a portion of the tax that you would owe if the dividend was unfranked. In Australia, these taxes are paid to the Australian Tax Office (ATO).

for those of us who are not Aussies!

Call the "original amount" X. If the corporate tax rate is 30$, the corporation has already paid 0.3X leaving X- 0.3X= 0.7X to give to you: 0.7X= 500 so X= 500/.7= $714.28. Would be the "unfranked" amount. Unfortunately, I am still not clear on what the "50%" in a "50% franked dividend of $500" means.

 

[tacman]

To calculate your assessable income in relation to this 50% franked dividend of $500, you would first need to determine the franking credit attached to the dividend. In this case, the franking credit would be 50% of $500, which is $250.

Next, you would need to add the franking credit to the dividend amount to get your total assessable income. So, your assessable income would be $500 + $250 = $750.

However, since the corporate tax rate is 30%, you would also need to take that into account. This means that 30% of the $500 dividend has already been paid as corporate tax, and you will need to pay the remaining 70% as personal tax.

To calculate the amount of personal tax you would owe, you can use the formula: assessable income x personal tax rate. In this case, it would be $500 x 0.7 = $350.

Therefore, your assessable income in relation to this 50% franked dividend of $500 would be $750, and you would owe $350 in personal tax. It's important to note that this is just a general calculation and your actual assessable income and tax liability may vary depending on your individual tax situation. It's always best to consult with a tax professional for personalized advice.