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What is the formula to determine the total % return on a fully franked dividend?

What is the formula to determine the total % return on a fully franked dividend? Stephen Karpin, CommSec


What is the formula to determine the total % return on a fully franked dividend?



If a dividend is 100% Franked, then for every $30.00 of tax paid by the company, a franked dividend of $70.00 can be paid.

Company Profit:  $100.00

Tax Paid:            $ 30.00

Dividend Paid:     $ 70.00

So, if a 100% franked dividend of $1200.00 is received, the imputation credit is calculated as follows:

Franked Dividend x30/70 = $514.29

How does Dividend Imputation work?

Firstly, let’s look at the current tax rates to work out the effects of franked dividends and imputation credits. We have retrieved this information from the Australian Taxation Office, go to for more information.

The following rates for 2011-12 apply from 1 July 2011:

 Taxable Income

 Tax on this income

 $0 - $6,000


 $6,001 - $37,000

 15c for each $1 over $6,000

 $37,001 - $80,000

 $4,650 plus 30c for each $1 over $37,000

 $80,001 - $180,000

 $17,550 plus 37c for each $1 over $80,000

 $180,001 and over

 $54,550 plus 45c for each $1 over $180,000

 The above rates do not include the Medicare levy of 1.5% and are applicable to Australian Residents only. Tax offsets reduce the tax payable. Tax offsets based on taxable income levels apply to a range of circumstances. For more information please visit Australian Taxation Office website and go to “About tax offsets”

In this example we have used an individual who earns $30,000 Per Annum.

Income                                 $30,000.00

Dividend Received                 $1,200.00

Imputation Credit                  $514.29

Total Assessable Income    $31,714

Tax on Income                       $3,857.10

Less Imputation Credit           $514.29

Tax Payable                         $3,342.81

The benefits with imputed credits as a result of receiving Fully Franked Dividends help reduce your taxable Income, especially for individuals who pay tax at less the 30 cents in the dollar.

Before considering purchasing a share and its effect on your income, we suggest that you consult your financial planner or accountant.

By Stephen Karpin, General Manager, CommSec

Important Information

The views expressed in this article are those of Stephen Karpin, a representative of Commonwealth Securities Limited (CommSec) ABN 60 067 254 399 AFSL 238814.  Commonwealth Securities Limited (CommSec) ABN 60 067 254 399 AFSL 238814 is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 and a Participant of the ASX Group. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances and if necessary, seek appropriate professional financial and taxation advice.  



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