§ Rules · Income Tax Assessment Act 1997 (Cth) Division 207
Franking gross-up arithmetic at the 30% company rate
Worked example: A $7,000 fully franked cash dividend
| Cash dividend received, fully franked | $7,000 |
| Grossed-up amount ($7,000 ÷ 0.70) | $10,000 |
| Franking credit (gross-up − cash) | $3,000 |
| Accumulation phase: fund tax at 15% of $10,000 | $1,500 |
| Accumulation phase: offset remaining as refund | $1,500 |
| Retirement phase (0% on that income): offset refunded in full | $3,000 |
Partially franked dividends scale the credit by the franking percentage; the divisor mechanics are unchanged.
A fully franked dividend arrives with company tax of 30% already paid on the underlying profit. The recipient grosses the cash amount up by dividing by 0.70, includes the grossed-up figure in assessable income, and receives the difference back as a tax offset, refundable for a complying superannuation fund.
How the rule counts
- 01Gross-up: cash dividend ÷ (1 − 0.30). At 30% company tax the credit equals 3/7 of the cash amount.
- 02The grossed-up amount (cash + credit) is what enters the fund's assessable income.
- 03The credit then applies as a tax offset against the fund's 15% rate; for a complying fund any excess is refundable.
- 04Income supporting retirement-phase pensions is taxed at 0% (ECPI), so on that income the whole credit comes back, subject to the 45-day holding period rule qualifying the credit at all.
Sources
- ATO: allocating franking credits (imputation)
- Income Tax Assessment Act 1997 (Cth) Division 207 (gross-up and tax offset)
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