Categories
The Power of Franking Credits in Super
How good are Franking Credits in a Super Fund? Surely Franking Credits in Pensions are NOT fully refundable?
“There is an undeniable tax benefit in holding quality Australian companies that pay out fully franked dividends as part of your self-managed superannuation fund’s portfolio regardless of whether you are still contributing, transitioning to retirement or are fully retired” says, Tanya Hofbauer, our in-house SMSF specialist.
Asset diversification is important and a major consideration required by the ATO, however, it’s also wise to consider the benefits of fully franked income which offers franking credits (or imputation credits). Franking credits received from Australian share dividends can be used to offset tax when an SMSF lodges its tax return at the end of the financial year. Franking credits signify that some or all company tax has already been paid on a dividend before it’s paid to shareholders.
If your SMSF is in pension phase with a tax rate of zero, these franking credits are likely to exceed the tax that is payable in the SMSF. In this case, your SMSF will receive a refund of franking credits at the end of the financial year. Even if your SFMSF is not in pension phase and paying the tax rate of 15%, franking credits can still reduce tax payable and may result in a refund.
Potentially there is a much higher rate of return in your SMSF by investing in publicly listed Australian Shares but don’t take our article words for it, take our written words by engaging our services.
Pat Mannix, Partner, Paris Financial