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What are franking credits?

Posted on January 15, 2020 by admin

Franking credits are a kind of tax credit that allows Australian companies to pass on the tax paid at a company level to shareholders. Franking credits can reduce the income tax paid on dividends or potentially be received as a tax refund.

Where a company distributes fully franked dividends (and those dividends are included in the taxable income of the taxpayer) the taxpayer can claim a credit against their taxable income for the tax that has already been paid by the company from which the dividend was paid.

Since the 2016-17 income year, the standard formula for calculating the maximum franking credits is:

Franking credit = (dividend amount / (1-company tax rate)) – dividend amount

Franking credits are paid to investors in a 0-30% tax bracket, proportionally to the investor’s tax rate. If an individual’s top tax rate is less than the company’s tax rate, the ATO will refund the difference. Therefore, an investor with a 0% tax rate will receive the full tax payment paid by the company to the ATO as a tax credit. Franking credit payouts decrease proportionally as an investor’s tax rate increases. Investors with a tax rate above 30% do not receive franking credits with dividends and may even have had to pay additional tax.

There can be eligibility requirements that must be met before franking credits can be paid, such as that you must hold the shares ‘at risk’ for at least 45 days to receive a total franking credits entitlement of $5,000 or more. There are also rules that can apply to buying, holding and selling shares with franking credits attached.

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What are the different types of cashless payment methods?

Posted on July 1, 2020 by admin

In an effort to minimise physical contact during the global pandemic, most businesses are making the switch to cashless payments. While contactless credit cards and mobile wallet applications remain the most common type of cashless payments, many other methods have emerged in recent times. In the event that your business is also looking to make the switch, here are a few cashless payment types to be aware of.

Radio-frequency identification (RFID):

RFID uses radio technology to track tags containing electronic payment and banking information. RFID tags are most commonly attached to wristbands, watches or badges and can be scanned using mobile phones and RFID system technologies.

RFID tags can also be used at business events or service-providing organisations to keep track of clients while also acting as their digital wallet.

Unstructured Supplementary Service Data (USSD):

USSD services are another real-time cashless payment method which require a mobile network. With the USSD method, clients must dial a USSD code on an interactive menu provided by the business (could be a mobile phone), which will then allow clients to make payments to chosen recipients. The USSD code is dependent on a client’s mobile network and in order to make successful payments, clients must have their bank accounts correctly linked to their mobile phone number.

Quick Response (QR) Codes:

A QR code is a two-dimensional gridded pattern of black squares and is a viable cashless payment method as long as both clients and businesses have modern image-reading and camera technologies. Payments made through QR codes require a user to scan the QR code of a merchant to complete the transaction and can be done through banking apps or third-party payment applications on mobile phones.

While it may be tempting to make an immediate switch into cashless payment methods, the technology required to support cashless transactions is a costly investment. Before jumping the gun and spending money you do not need to, take note of which cashless payment methods would best accommodate your clients’ needs and fit into your existing business operations.

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