What does it mean if a company pays a dividend that is 0% unfranked For example HASTINGS HIGH YIELD (HHY) stock costs $0.38 and I buy 1,500 shares = $570 Now they pay a dividend of $0.03 (for example) 3 cents so dividend time comes and its 1,500 x 00.03 = $45 The Franked amount says (0%) or no franking. So I know that means they havent paid any tax on the dividend. Howmuch does that mean I have to pay in taxes? or whatever payment applies. 1 scenario where I earn $50,000 per year 2 scenario where I dont have an income at all. Thankyou to anyone that answers this!
Assuming they are in an individual's name. The 0% franked dividends should be taxed at the income tax rate.
Unfranked dividend: dividend amount declared as taxable income (think interest earned on a savings account). If it had any franking credit you get to claim the 'franked amount' as part of your deduction, in this case NO claim, so no reduction in taxable income. I can post a basic formula guide for you later on if it helps or PM it to you.
So to understand franking you need to understand how company tax works. Companies pay tax generally at 30% of their earnings. So people don't pay tax twice on the same earnings, the government gives people credit for the tax already paid by the company. As a result, when a company pays dividends, if these dividends are 100% franked, 30% of the tax on the income will be determined to have been paid. If your income tax rate is higher than 30% you have to make up the difference. If it is less, you get a refund. Where franking is at zero percent this means that no tax has been paid on the earnings, and you will be liable for the tax on that income at whatever your income tax rate is
Example from N.E Renton "Understanding the Stock Exchange" company Gross Profit (Say) 1200 Less Com Tax @ 30%. 360 Net Profit. 840 Franked Div. (say). 500 Retained Profit. 340 individual on 30% Marginal Rate Franked Credit 500 Imputation Credit. 214 (30/70 x 500) Total grossed amount. 714 Personal Tax at 30% on div. 214 Less Imputation Credit. 214 Tax status. 0. No tax payable/no refund carried
Working off my phone and I am no tax adviser but if your income is zero you will pay no additional tax. If your income is 50k you will pay $193.8 extra in tax on $570 of income including Medicare levy. But seriously, get better advice than from strangers on the Internet....
0% franking so as you say no franking credits. Income simply gets added to your personal income and you pay tax at whatever marginal rate you are on.
