Don’t Wash Your Dividends

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The Australian Tax Office recently issued a media release warning taxpayers about “dividend washing”.

Dividend washing effectively allows a taxpayer to obtain two franked dividends on the same parcel of shares.

It is particularly attractive in a superannuation environment where the tax rate payable by the fund on dividends received, being 15% before pension mode or 0% in pension mode, is less than the company tax rate of 30%.

If the dividends are fully franked the super fund will receive a franking credit (i.e. a tax refund) of 15% or 30% depending on its tax status.

The ATO’s media release is a warning bell before it releases a public ruling on the issue.

The media release and details of the scheme can be found here.

 

Brendan Cockerill is a Business and Succession Lawyer at Dobinson Davey Clifford Simpson, 18 Kendall Lane, New Acton, Canberra ACT 2601 and can be contacted on (02) 6212 7600.

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