Following the franking credits debate sparked by Opposition Leader Bill Shorten recently, some YourLifeChoices members who own shares have asked how to apply for a tax refund.
Not all listed companies pay tax on dividends they distribute and others pay only some of the tax liability. When the former occurs, then the shareholder receiving the dividend may be liable to pay tax. If the latter occurs, your dividend is described as partially franked and the amount of tax the company has paid is listed as a percentage.
Shareholders who receive fully franked dividends are entitled to offset the tax paid by the company on their behalf against tax liabilities they have. The amount that can be claimed is called the franking credit.
In the case of retirees, most who have an income below a certain threshold will have a personal marginal tax rate of zero. People in that category are not expected to pay any tax and thus are entitled to a refund of tax paid on their dividend by a company on their behalf.
To convert a franking credit into a tax refund, a shareholder needs to lodge a tax return declaring the amount they have received in dividends and any franking credits attached to them. Both these amounts will be recorded in statements the company sends to shareholders twice a year.
If you are not sure whether you have been receiving dividends that have franking credits you can phone the share registry your company is listed with to find out. Make sure you have your shareholder reference number when you call. The number begins with a capital letter and is followed by 10 digits. If you can’t find your number, ask the registry how else you can retrieve your information.
To find out which registry to contact, you can type the company name into this shareregistry.com.au website. Below is a list of the registries of major companies that are popular with Mum and Dad investors:
Telstra – Link Market Services
Commonwealth Bank and Westpac Bank – Link Market Services
Qantas – Qantas Share Registry
Woolworths – Computershare
BHP Billiton – Computershare
David Jones – Computershare
Wesfarmers – Computershare
Medibank Private – Computershare
CSL – Computershare
ANZ and National Australia Bank – Computershare
Registries such as Computershare provide a tax pack for a small fee to help you collate all the information you need about your shareholdings in order to lodge a tax return.
For more information on whether you are eligible to claim a tax refund from franking credits, visit the Australian Taxation Office website.
Have you overlooked claiming a refund of franking credits? Do dividends from shareholdings form a part of your income?
All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.
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