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After tax return on shares

Discussion in 'Accounting, Tax & Legal' started by Nudge67, 31st Jan, 2008.

  1. Nudge67

    Nudge67 New Member

    Joined:
    28th Jan, 2008
    Posts:
    1
    Location:
    Sydney,NSW
    Hi,

    Can someone tell me if I am on the right track here for my proposed share portfolio ?

    (Dividends+Imputed tax credits) = taxable income.
    Taxable income - interest paid to earn income = loss (in my case).
    Tax on loss + imputed tax credit = refund.
    Refund plus original dividend = overall return (after tax).

    Thanks again
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  2. Rod_WA

    Rod_WA Well-Known Member

    Joined:
    18th May, 2007
    Posts:
    324
    Location:
    Inglewood, WA
    Howdy Nudge

    Yeah, looks right. But I'll present it in a different way, so you can cross-check.

    Franking Credits (FC) = Div x 0.3 / 0.7 x F%
    [F% is franking%].

    Grossed-up dividend = Div + FC = Div x (1 + 0.3 / 0.7 x F%)

    The taxable income from shares = Grossed-up Div - Loan Interest

    You then pay tax on the taxable income at your marginal tax rate.
    (If the taxable income from shares results in a loss, then you will get a tax refund.)

    Separately, the ATO returns the franking credits to you, regardless of whether your taxable income from shares is positive or negative.

    Hope this makes things clear.