Franking Credit

A tax credit known as a “franking credit” is one that is related to “franked” dividends, which are payments made to shareholders by firms. If the company that is issuing the dividend has already paid taxes on the money that will be used to pay the dividend, then this is known as a tax-free dividend. For an individual, it functions in a manner comparable to PAYG taxes, which are levied by your employer and added to your nett wages. When it comes to Australia’s income tax landscape, the franking credit system is designed to prevent company profits from being taxed effectively twice: once at the level of the company, and then again in the hands of the individual shareholder when they receive a dividend. This occurs when a company pays out a dividend.