Franking credits explained

• The credit is shown on each dividend statement, along with how much of the dividend is franked.
• Declare the cash dividend plus the credit (the grossed-up amount), then claim the credit.
• Once your credits for the year reach $5,000, each purchase of shares has to be held for 45 days to count.

A company that pays tax at 30% and pays a fully franked dividend of $70 has already paid $30 of tax on the $100 of profit behind it. That $30 is the franking credit.

• Fully franked: the whole dividend carries a credit.
• Partly franked: only part of it does. A dividend 60% franked carries a credit on 60% of the cash.
• Unfranked: no credit, usually because the profit wasn't taxed in Australia. Dividends from overseas shares are never franked.

Smaller companies may pay tax at 25%, and their credits are smaller to match: a $75 fully franked dividend from them carries $25.

To work one out: the franked part of the dividend × the company's rate ÷ (100 less the rate). At 30% that is the franked amount × 30 ÷ 70.

You receive a fully franked dividend of $700 from a company that pays 30% tax. The credit is $300, so the grossed-up dividend is $1,000. That $1,000 goes into your taxable income, and the $300 comes off the tax on it. With round tax rates, and leaving out the Medicare levy:

• No tax to pay on your income: the whole $300 is refunded.
• Taxed at 30%: $300 tax on the $1,000, less the $300 credit. Nothing more to pay.
• Taxed at 45%: $450 tax, less $300. You pay $150 more.

So franking credits are worth most to people on low tax rates, such as retirees and super funds in the retirement phase. Try different figures in the free dividend calculator, which works out franking for a whole portfolio over the years.

Australian resident individuals get any credits left over once their income tax and Medicare levy are covered, as long as the integrity rules below are met. Complying super funds, SMSFs included, can be refunded too. If you don't otherwise need to lodge a tax return, you can apply to the ATO for the refund on its own.

Companies can't get a cash refund of excess credits, and foreign residents generally can't use them.

To stop people buying shares just before a dividend and selling straight after, a credit only counts if you are a "qualified person". Two rules decide it:

• Holding period rule. Hold the shares "at risk" for at least 45 days (90 for preference shares), not counting the day you bought or the day you sold. Hedging the shares, for example with options, can stop days counting. It is met once for each purchase, not for each dividend.
• Related payments rule. You mustn't pass the benefit of the dividend on to someone else. This applies to everyone, whatever the amount.

The $5,000 exemption. If all your franking credits for the year come to less than $5,000, the holding period rule doesn't apply. That is roughly $11,667 of fully franked dividends from companies paying 30% tax. Above it, a purchase that fails the rule loses all its credits, not just the part over $5,000.

If a credit doesn't count, you still declare the dividend, but leave that credit off your return.

• Unfranked amounts, franked amounts and franking credits each have their own label (11S, 11T and 11U on an individual return).
• Dividends are usually prefilled from the share registries, but check them against your statements.
• Franking credits passed on by an ETF or managed fund come through its annual tax statement instead.

Do I get franking credits on reinvested dividends?

Yes. A dividend you reinvest through a DRP is treated as paid to you, credits included. See dividend reinvestment plans and tax.

Do ETFs pass on franking credits?

Yes, if they hold Australian shares. The fund's annual tax statement shows them. See how ETFs are taxed.

Is a franking credit the same as the dividend yield?

No. A yield quoted "grossed up" includes the credits, so it is higher than the cash you receive. Compare like with like.

Portfoli.au estimates your dividends from each ex-dividend date and the units you held. On Plus and Pro, set how each holding is franked from your statements and it works out the credits and the grossed-up amount for each financial year, ready for the tax-time pack.

How to add franking, or start free.

• ATO, Refund of franking credits for individuals (updated 22 June 2026)
• ATO, Special circumstances 2026 (individual tax return instructions)

Check with a registered tax agent before you act.

• How ETFs are taxed in Australia: Distributions, the annual tax statement, cost base changes, and selling units.
• Dividend reinvestment plans and tax: Why a reinvested dividend is still income, and the records each new purchase needs.
• Capital gains tax on shares in Australia: When you pay tax on selling shares or ETFs, how the gain is worked out, and what to do with a loss.
• How to track your share portfolio in Australia: The records to keep, a spreadsheet or a tracker, and the figures worth watching.
• All guides, and help with using Portfoli.au.
• Capital gains calculator: work out the gain on one sale, free.
• Dividend calculator: estimate dividend income with franking credits, free.