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Dividends what are the tax benefits!

Discussion in 'Shares' started by TROM, 2nd May, 2009.

  1. TROM

    TROM Active Member

    Joined:
    17th Jul, 2006
    Posts:
    35
    Location:
    WA
    Hi can anyone advise what are the benefits of dividends from Shares. If they are fully franked does that mean you don't have to pay tax on them.

    But if it is part of your investment income you would have to pay tax as part of your gross income.

    Are Dividends are tax effective way of receiving income as well as rental income.

    Any thoughts
     
  2. jrc77

    jrc77 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    147
    Basically a "fully franked dividend" is one where the company has already paid tax on it at the company rate (30%). Hence with such a dividend you get a "imputation credit" that equates to the amount of tax already paid.

    If your marginal tax rate is 30% then you won't have to pay any more tax, if your marginal tax rate is more you pay the difference. If your marginal tax rate is less (say you had no other income) I believe you would even get a tax refund for the imputation credit!

    Hence getting a fully franked dividend is signficantly better than a same sized unfranked dividend! ;)

    Regards,

    Jason
     
  3. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Also superannuation funds will get back halve of the franking credits. Eg, franking credit less superannuation income tax = tax refund, 30% less 15% = 15% refund.

    Cheers,

    Dan
     
  4. TROM

    TROM Active Member

    Joined:
    17th Jul, 2006
    Posts:
    35
    Location:
    WA
    So do you think combining property and shares is a reasonably conversvative strategy to build up your net wealth. Kind of like Steve Navra's take on LOE.

    I have read it about 3 times and think it is quite good, but I was a bit worried about the current downfall with the share market etc, how you plan for that so you can manage risk. Would it be borrowing less than on your margin loans and not over extending.

    Plus who hear has actually is current using this system from Navra.