It is very easy for citizens to be somewhat confused about the use of franking credits and how they apply to investments.
Most commonly identified with property assets, this is an initiative that has been debated and discussed in public and private circles.
Before making any assumptions on the topic, we will see how community members can assess franking credits as a topic.
Cashing in on Stock That Was Previously Taxed
One of the best places that constituents can start with their assessment of franking credits is understanding that it is a program that works around taxation. For shareholders who find that their investment has already been taxed, this is a means of accessing those funds through the initiative. When an ASX-listed stock has already paid tax on your behalf, that is how those funds make the transition to become a credit, something that can be overlooked by some constituents who are not careful with their money.
Built-In & Automated Credits in Certain Cases
There will be clients who have developed a portfolio whereby franking credits are automatically allocated with their dividends and returns. While some members will receive the money as a refund, it will be dividends from listed stock options where the returns are built-in. This minimises any logistical or accounting complication along the way and helps investors who want to gain those assurances in quick time without encountering extra steps in the process.
Long Standing Public System
This type of credit system was implemented by the Hawke government in 1987, illustrating a degree of longevity that has been in place for 35 years and counting. Although it has been a hot button topic of debate and discussion over the past couple of election cycles, it should come as no surprise that there are participants who are staunchly passionate about accessing their credits while others are advocating for alternative frameworks that could help to combat inflation. For those who think it might be a new innovation, they should appreciate that there has been a lengthy track record involved.
Potential for Credits to be Applied to Other Income Sources
An interesting facet that happens to be in play with franking credits will be the potential, in certain conditions and under certain stipulations, to divert these funds to help cover other sources of income. Citizens who are dealing with particular tax obligations for other properties and assets may very well determine that the credits they could receive for their central investment would be better placed covering those liabilities. By connecting with a trusted accountant on this topic, it is easy to see where the savings can be found.
Tax Return Publishes Credits List
For those constituents who want to keep tight and efficient records with their franking credits and see precisely how they are applied, an official tax return document will detail exactly how and where those funds are allocated. This is key for the sake of the Australian Tax Office (ATO) and how they apply laws and standards. Yet it is essential for community members who want to ensure that there is transparency on all fronts if they want to examine and analyse what money they are being afforded in these spaces.
Earnings + Dividends Are Taxed as a Collective Amount
If there are local members who are given dividends in the form of $12,000 and $4,000 in franking credits, then the individual will be taxed for a total of $16,000. For those who want to simplify how much they need to allocate for tax purposes, this is a helpful guide. By combining the dividends total with the credits, then participants know what they are dealing with come the end of the financial year on June 30.