I have recived $6000 of unfranked dividends and want to know what that means to my tax. can i deduct that amount? also the money i used to borrow so i could buy the shares in the first place can i use that as a tax deduction. my accountant told me but i cant remember. just trying to see if i can get a decent tax return this year
thank you
clueless (obviously)Franked dividends have had the company tax taken out already so you will get a rebate. Unfranked means no tax has been deducted or witheld so you will be taxed at your marginal tax rate (that is the dividends are added to your taxable income directly).
Interest on a loan to buy the shares is a tax deduction. However if you are claiming interest pre-paid you can only claim a percentage in the year you claim it and the rest spread out over the next couple. You’ll have to look that up.Franking credits are derived from tax paid by the company before the payout dividends. Being unfranked, the dividends would have been paid from pre-tax profit, meaning you will need to pay tax on that $6000 at your marginal tax rate. The interest you have paid to finance your share purchase is deductible. You can use this to give yourself an idea of your tax payable/receivable for the year, however it sounds as though you would be best served getting your tax return prepared by a professional as there are a number of complicated issues associated with this.
All the best.
Hello Clueless,
The unfranked dividend is shown in your income tax return at item 11 S. There is no credit for imputation credit on this amount. The company has not paid any tax for this dividend for whatever reason.Franked dividends are the ones that will have imputaion credits.
You can claim the interest on borrowed funds for shares purchased to receive dividends. this is laimed at item D7 -Interest and dividend deductions.
As a further piece of information. Item 11T is where a franked dividend is recorded an itm 11U is where the imputation credit is recorded.
When working out your tax calculation the amount of imputation credit is deducted off the amount of tax due.
I am using the item numbers in the 2004 tax pack.C W Woodhouse
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