New Subscriber. Love your no nonsense videos. I'm also a accountant. As you said, the concept of Franking Credits makes perfect sense. What doesn't is the refundable part. Franking credits had been around for a long time, but previously only reduced your tax liablity to $nil. So your small shareholder example would have his tax bill essentially waived but not get a refund. Then one day John Howard thought it would be a great way to bribe his retiree voter base by giving them cash refunds on top of their dividends! And we've been addicted to refundable franking credits ever since.
Yeah the refund is bizarre. If someone is on a 30% tax rate and the dividend is $100 they essentially get taxed $30 then refunded that $30 for a total net dividend of $100. If someone is on a 20% tax rate they get taxed $20 refunded that $20 plus another $10 for a total net of $110. Wtf??? That money comes from the tax paid by the company which essentially reduces the tax rate paid by the company. If all the shareholders are low income earners then the company effectively pays a lower tax rate???
Exactly the same in NZD except it's called imputation credits here and the tax rates are different. It's one of the reasons why NZ and Aus have relatively high corporate tax rates, and why companies overseas (particularly tech stocks in the US) are loathe to declare dividends but would prefer to buy out other companies and return shareholders' value that way.
I have some shares and i remember around dividend time i was looking into franking credits and i never really understood it but this is honestly the first explanation that actually makes sense
All tax is applied arbitrarily when it comes down to it... The government needs taxes to run the country and has to extract it from somewhere. Maybe you think this is justified, but it will just be garnered from somewhere else, if not here... In my opinion, we have a progressive tax system to ensure less inequality, so it may as well be here.
@TheJimbles the government doesn't "need" to collect taxes to pay for anything. When your tax is paid, it is deleted. It doesnt change hands and recirculate. When the government wants to spend, it creates the money supply it needs. By spending more than they delete the currency is inflated. By spending less than they delete the supply is deflated.
@@cpowerbpower3339that’s a cool metaphor. You can’t delete money unless you’re the reserve bank, also can’t print it. Also not a government entity. Governments borrow money through bonds and pay them off with tax dollars. 🎉
As a one-man-band limited liability company based in the UK everything appears to be taxed. we used to have tax free dividends but then that changed so it was down to only a couple of grand before you're taxed. my business is taxed on it's sales, then taxed on profits, then the profit shares are paid to me as dividends and I pay tax on them again. This makes investing in businesses and entrepreneurship look complicated and expensive when compared to buying another house, slapping some paint on it then renting it to some poor sods who can't quite afford to buy thus locking them into rent for the rest of their lives. Soapbox away, sorry!
Your limited company is a separate legal entity. It pays corporation tax on profits. When you as an individual receive a dividend this is new income to you. Let's not pretend it's double taxation. You don't pay NI or Employer NI on dividend income where you do on payroll. You control your PAYE salary, your pension contributions and expenses to minimise your corporation tax. I know this because I do the same. Let's not delude ourselves we're hard done to.
@@FONASDeadlock it is absolutely better than being paid PAYE, cannot disagree there but company profits are taxed at 20% then again at 25% (or more!) when paid to a shareholder. This stifles growth IMHO, not for the one-man-band but for the prospective investor.
Conceptually, it is a bit different. People band together to run a business. They each get a share of the profit according to their share numbers, and they pay tax at the rate for their total income. The company pays 30% tax on behalf of shareholders as a benchmark. It means foreigners pay the 30%, as well as people who don't file a tax return. It is a great system - income taxed once. VAT/GST is another tax the shareholder pays - it is at a flat rate, so just paid through the company.
The company has already paid the tax. It would be clearly theft to tax the dividends as gross income when the shareholders already paid the corporate tax rate.
The US does not do credits for dividend income. Instead, there is a separate dividend rate so that if you add the two together (the corporate rate and the dividend rate), the total amount of tax paid at both levels is equal to if it had just been individual earned income. In this way, Australia’s system is probably fairer since it only adjusts the effective tax rate on corporate income actually passed on to shareholders instead of also lowering the rate for income that just sits on a balance sheet for years.
If it encourages proper to buy shares Australian companies over foreign companies turn it could be a good thing. If it helps the economy grow overall the tax revenues might be higher
Just remember that every employee uses the exact same principle of paying tax based on their actual income. Once you understand that, and that franking credits result in an individual paying the exact same rates of tax on a given income level as does an employee, it all becomes extremely simple.
A lot of european countries tired this but were stop by the eu because it was discriminatory to foreign firms. It is actually a great way to increase corporate tax (compared to 10-15% in say the uk).
It's not broken, it is the absolute fairest way to tax income as everyone will pay it at their marginal tax rates. High or low income earners are not penalised by the system. The only issue is how it interacts with your superannuation system. In this system earnings on up to 1.7million in capital are tax free. This means that retirees can get that 30% tax paid by the company back at tax time. This is because their marginal tax rate as retirees is 0%. To fix the system the government needs to look at how retirees income is treated. Imo it would be much better to be tax free going into the retirement system (rather than being taxed at a flat 15% or 30% if a very high income earner) and then it could be taxed on the way out and normal marginal rates but when compulsory superannuation was introduced they didn't want to wait 30 years to access that tax income so they decided to tax it as it goes into the retirement account.
In Brazil, dividends are not taxed at all. But there are no "franking credits". No need of them. The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
In Brazil, dividends are not taxed at all. But there are no "franking credits". No need of them. The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
In Brazil, dividends are not taxed at all. But there are no "franking credits". No need of them. The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
@@russelbiffs3683 this is the sensible approach. If you taxing dividends you taxing the same $ twice as the company has already paid tax on their profit so to tax the dividend is crazy. Not that tax law makes sense all the time.
It literally is taxable income. It's just that 30% is paid in advance by the company. Then it's adjusted to your marginal rate when you submit your tax return.
@@russelbiffs3683 Brazil has it right! Here Its basically taxing the same $ twice, first the company pays the tax and then the shareholder pays the tax! Its just stupid!
I’m from the US and I’ve never heard of this concept. Not sure if we do this or not in public stocks. If Australia doesn’t tax a public company’s profit twice or double dip in this example, up until the part that explains frank credits made sense to me. The company was taxed on its profits, then after tax the company paid dividends to its shareholders. Ok so why is Australia paying tax credits based on shareholders tax bracket?
In Brazil, dividends are not taxed at all. But there are no "franking credits". No need of them. The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
Doesn't cost the government anything. Its all taxpayer money. And should never be seen as governments money. Also super funds make a fortune and massive returns due to this exact issue as they do not pay tax, so super returns would drop significantly across the board.
Or you could just invest in US multinationals that pay no tax what so ever, and most returns come in the form of capital gains, so the tax is half when you sell. Also, US shares have blown Aussie share’s out of the water over recent history and probability will continue to do so.
Owning shares is not owning a company. No responsibility besides ethics and no liability, means not paying income tax is stealing. God bless Australia for one just follows the rules.
I legit thought this was going to be about the franking privilege from the post office. Turns out, that totally just a US thing. And now, I know a Aussie only thing!
In Brazil, dividends are not taxed at all. But there are no "franking credits". No need of them. The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
Not levying a tax does not "cost Aus $43b a year" unless you are saying 100% of our money should be paid as Tax and anything not collected is costing the Government.
Shareholders rarely set foot in the company(ies) they have a stake in(if ever). It's like you rent out your house, get paid and have to declare that income, because it is an income for you. Yes, the person(s) you rented out your house to got taxed on their salary before you got the rent. So on and so forth. Alot of examples can be given and if one falls, all falls and a 72h countdown begins.
@@qzy-179SanTzxkW I guess that analogy works if you're willing to go along with equating a 0.05% ownership stake/share in a company to fully owning a house that you're renting out. Depends where we want to draw lines.
Wow, I want to move to Australia! I dont really get how they get away with that though. I assume your workers pay tax? Why does a worker pay tax but a shareholder not? And then I assume ordinary people pay tax when they buy stuff, like we have VAT in the UK, fuel duty etc, isnt that taxing them twice? Its their "Post-Tax" profit, essentially? Although realistically you could argue a house, car etc is an expense, so its not even profit you are taxing from them, it's actually a revenue tax. You're revenue taxing workers and then giving a government handout to shareholders, and your population is fine with that? Crazy!
It doesn't cost the taxpayers any money at all, it is money on which the tax has already been paid, suggesting that it does is like saying the average paye individual costs the taxpayer the other 70% of their pay, because the ATO would like to take it, but can't because they've already paid the tax that is due.
So the Australian taxpayers foot the bill for the lower tax bracket shareholders? Why not just cancel the taxes owed on the sub 30% ers instead of forcing the taxpayers to subsidize the remainder? Or am I understanding this incorrectly?
Your logic implies that taxpayers foot the bill for lower tax bracket wage earners as well. Which is of course true, low income earners do not pay their fair share.
Accept the part where no the fuck it doesn't. That's still income for the shareholders. Think of it this way. If a company pays me from the profit the company has generated, I still owe income tax. What's the difference? There isn't any.
@@collinsmcrae If a company pays you 70 dollars of post tax distributions, and the government takes your 70 as assessable income without franking credits, then then it could end up that youre paying like 60 cents on the dollar in taxes, which is "I'm leaving for another country" territory. i think you genuinely dont understand or you're a socialist.
@@collinsmcraeso every dollar of company profit should be taxed at 30% and then taxed at your marginal rate as well? Why the hell even have a business. Just give the government all of your money
@@pancakes4140 It's not the companies money once it changes hands, it's the shareholders income. Obviously, rules and regulations around this are going to vary from place to place, but most people do not get dividends in the US tax free simply because the business already pays taxes. My boss already pays taxes on the money he pays me, so what is the difference?
Post-tax dividend distributed to shareholders should be completely tax free in the hands of shareholders. Dividend is an appropriation of after-tax profit. It's already taxed, so the govt shouldn't be allowed to tax it again
You could argue by taxing dividends as well companies are incentivized to invest into the business itself and spend more on R&D which ultimately will benefit the business more than paying out huge dividends
In Brazil, dividends are not taxed at all. But there are no "franking credits". No need of them. The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
@@clemensweiss6163Does it really though? I’ve heard that argument before but at series second glance it looks to me like it instead adds a bit to the cost of capital rate for shareholders. They then demand a higher dividend relative to the company valuation and as such can make the ROI discount rate used to assess capital projects higher, putting said business off investments if it deems the rates of return as insufficient. In some cases there’s cash hoarding and investing or M&A consolidation instead. I’m also wary that it indirectly encourages greater leveraging by corporations, ie corporate debt to try rejig the WACC.
companies saying that someone elses income is not taxable because it originally came from them and they paid tax is the most insane thing ever. that would mean no one pays taxes. smh
All Franking Credits do is ensure taxpayers pay tax on their dividends at their marginal rate, the dividends could even increase the taxpayer's marginal tax rate. It's a fallacy that it costs taxpayers anything, it's simply returning overpaid tax to investors. Think of it this way. Imagine earning $1 in overtime. The 45% marginal rate tax payer would receive $0.55 after paying $0.45 in tax. If that same person received $1 in dividends, $0.30 has already been paid by the company, they pay an additional $0.15 in tax on the dividend, meaning they pay the same $0.45 in tax.
Worth noting The Labor party brought changes to Franking credits to the 2019 election. Was democratically voted down. Disappointing especially if you're wealthy enough to pay zero tax and end up with large payments footed by the Australian tax payer.
Sure. If you’re not paying the Australian government any taxes you can think of it as getting 100% off your Australian taxes every year, forever. Great deal for Americans.
No, it doesn’t “cost” the taxpayer anything. Government in all its forms is what “costs” taxpayers. Government is 100% cost on the taxpayer. Reducing double taxation only reduces government revenue…which is always a good thing and benefit to the taxpayer. Less government spending, revenue and size is always a benefit and never a cost to actual taxpayers.
Wow, I want to move to Australia! I dont really get how they get away with that though. I assume your workers pay tax? Why does a worker pay tax but a shareholder not? And then I assume ordinary people pay tax when they buy stuff, like we have VAT in the UK, fuel duty etc, isnt that taxing them twice? Its their "Post-Tax" profit, essentially? Although realistically you could argue a house, car etc is an expense, so its not even profit you are taxing from them, it's actually a revenue tax. You're revenue taxing workers and then giving a government handout to shareholders, and your population is fine with that? Crazy!
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New Subscriber. Love your no nonsense videos. I'm also a accountant. As you said, the concept of Franking Credits makes perfect sense. What doesn't is the refundable part. Franking credits had been around for a long time, but previously only reduced your tax liablity to $nil. So your small shareholder example would have his tax bill essentially waived but not get a refund. Then one day John Howard thought it would be a great way to bribe his retiree voter base by giving them cash refunds on top of their dividends! And we've been addicted to refundable franking credits ever since.
Any one who falls in the lower tax bracket (
@@uberboiz Maybe so.
Can thank him for GST as well.
Yeah the refund is bizarre. If someone is on a 30% tax rate and the dividend is $100 they essentially get taxed $30 then refunded that $30 for a total net dividend of $100.
If someone is on a 20% tax rate they get taxed $20 refunded that $20 plus another $10 for a total net of $110.
Wtf???
That money comes from the tax paid by the company which essentially reduces the tax rate paid by the company. If all the shareholders are low income earners then the company effectively pays a lower tax rate???
Would seem to make more sense and be more equitable for dividends to be paid from pre-tax profit.
Thank you for explaining why there's so little information about this anywhere else. Didn't realize it was so rare outside of Australia.
In Brazil, dividends are not taxed at all.
I also didn't know it was so rare around the world.
Actually amazing content keep it up 👌
You best be making more content sir. I'm in nz but this is dope.
Exactly the same in NZD except it's called imputation credits here and the tax rates are different.
It's one of the reasons why NZ and Aus have relatively high corporate tax rates, and why companies overseas (particularly tech stocks in the US) are loathe to declare dividends but would prefer to buy out other companies and return shareholders' value that way.
I have some shares and i remember around dividend time i was looking into franking credits and i never really understood it but this is honestly the first explanation that actually makes sense
I’ve never understood how this is remotely controversial. Essentially the company profit (which you own) is taxed as your income (which it is)
All tax is applied arbitrarily when it comes down to it... The government needs taxes to run the country and has to extract it from somewhere. Maybe you think this is justified, but it will just be garnered from somewhere else, if not here... In my opinion, we have a progressive tax system to ensure less inequality, so it may as well be here.
@TheJimbles the government doesn't "need" to collect taxes to pay for anything. When your tax is paid, it is deleted. It doesnt change hands and recirculate. When the government wants to spend, it creates the money supply it needs. By spending more than they delete the currency is inflated. By spending less than they delete the supply is deflated.
Since when do governments have a problem taxing the same money multiple times?
@@wolfie54321they dont😅
@@cpowerbpower3339that’s a cool metaphor. You can’t delete money unless you’re the reserve bank, also can’t print it. Also not a government entity. Governments borrow money through bonds and pay them off with tax dollars. 🎉
Great explanation. This channel is gold.
As a one-man-band limited liability company based in the UK everything appears to be taxed. we used to have tax free dividends but then that changed so it was down to only a couple of grand before you're taxed. my business is taxed on it's sales, then taxed on profits, then the profit shares are paid to me as dividends and I pay tax on them again. This makes investing in businesses and entrepreneurship look complicated and expensive when compared to buying another house, slapping some paint on it then renting it to some poor sods who can't quite afford to buy thus locking them into rent for the rest of their lives. Soapbox away, sorry!
Everything in the name of democracy!😂
Renters are pathetic.
Serves them right for having no money to buy a house.
I like to think of my slaves.
Your limited company is a separate legal entity. It pays corporation tax on profits. When you as an individual receive a dividend this is new income to you. Let's not pretend it's double taxation. You don't pay NI or Employer NI on dividend income where you do on payroll. You control your PAYE salary, your pension contributions and expenses to minimise your corporation tax. I know this because I do the same. Let's not delude ourselves we're hard done to.
@@FONASDeadlock it is absolutely better than being paid PAYE, cannot disagree there but company profits are taxed at 20% then again at 25% (or more!) when paid to a shareholder. This stifles growth IMHO, not for the one-man-band but for the prospective investor.
Then you pay tax again when you die
How do we make you at the very least Australian wide famous!
Brilliant explanation and I love that it’s short and to the point.
Hello from Canada (for some reason). This information is irrelevant to me, but still interesting to learn about 😅.
same, from canada as well. Interesting to hear about other tax schemes in other countries
Conceptually, it is a bit different. People band together to run a business. They each get a share of the profit according to their share numbers, and they pay tax at the rate for their total income. The company pays 30% tax on behalf of shareholders as a benchmark. It means foreigners pay the 30%, as well as people who don't file a tax return. It is a great system - income taxed once. VAT/GST is another tax the shareholder pays - it is at a flat rate, so just paid through the company.
Id love to see Chris in an episode of Eutopia Australia
i still don't get it , but i still subcribed, sounds like we need to buy more shares.
Thank you for this. It was a great educational video
The company has already paid the tax. It would be clearly theft to tax the dividends as gross income when the shareholders already paid the corporate tax rate.
The US does not do credits for dividend income. Instead, there is a separate dividend rate so that if you add the two together (the corporate rate and the dividend rate), the total amount of tax paid at both levels is equal to if it had just been individual earned income.
In this way, Australia’s system is probably fairer since it only adjusts the effective tax rate on corporate income actually passed on to shareholders instead of also lowering the rate for income that just sits on a balance sheet for years.
If it encourages proper to buy shares Australian companies over foreign companies turn it could be a good thing. If it helps the economy grow overall the tax revenues might be higher
Just remember that every employee uses the exact same principle of paying tax based on their actual income.
Once you understand that, and that franking credits result in an individual paying the exact same rates of tax on a given income level as does an employee, it all becomes extremely simple.
Fantastic explanation, really good videos.
A lot of european countries tired this but were stop by the eu because it was discriminatory to foreign firms. It is actually a great way to increase corporate tax (compared to 10-15% in say the uk).
Genuinely wanna know what bath toys those are - they look cute!
Ok, so how much are you selling the toys for?
I think he said in the video that it’s his son’s toys. So you’ll need to speak to Frank about it.
As a Dutch person making software that communicates with our tax office.... It's nice to see other broken tax systems for once 😂
It's not broken, it is the absolute fairest way to tax income as everyone will pay it at their marginal tax rates.
High or low income earners are not penalised by the system.
The only issue is how it interacts with your superannuation system. In this system earnings on up to 1.7million in capital are tax free. This means that retirees can get that 30% tax paid by the company back at tax time. This is because their marginal tax rate as retirees is 0%.
To fix the system the government needs to look at how retirees income is treated. Imo it would be much better to be tax free going into the retirement system (rather than being taxed at a flat 15% or 30% if a very high income earner) and then it could be taxed on the way out and normal marginal rates but when compulsory superannuation was introduced they didn't want to wait 30 years to access that tax income so they decided to tax it as it goes into the retirement account.
In Chile it works in a very similar way.
God i wish you were American. 😅 This is such good content
Good stuff.
As an American…. Wish we had this set up
Well we didn’t get it by posting comments on TH-cam. If you want it, then you need to go out there and push for it.
In Brazil, dividends are not taxed at all.
But there are no "franking credits". No need of them.
The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
Great videos
I’ve been concerned for a while of who would take over from Alan Kohler when he retires. Turns out his son is able to fill the large foot steps 🤙
In Brazil, dividends are not taxed at all.
But there are no "franking credits". No need of them.
The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
Would love to see one on Options trading
I knew you dont get taxed on it, but i didn't know you get it back 🤯
Sounds similar to the dividend tax credit in Canada, except that in Canada it's not as powerful
This just makes me feel more broke than i already am
Awesome.
Lost me when the two bath toys were compared.
Here is an idea! Why not just make dividends not taxable income… much simpler!
In Brazil, dividends are not taxed at all.
But there are no "franking credits". No need of them.
The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
@@russelbiffs3683 this is the sensible approach. If you taxing dividends you taxing the same $ twice as the company has already paid tax on their profit so to tax the dividend is crazy. Not that tax law makes sense all the time.
It literally is taxable income. It's just that 30% is paid in advance by the company. Then it's adjusted to your marginal rate when you submit your tax return.
@@russelbiffs3683 Brazil has it right! Here Its basically taxing the same $ twice, first the company pays the tax and then the shareholder pays the tax! Its just stupid!
I’m from the US and I’ve never heard of this concept. Not sure if we do this or not in public stocks. If Australia doesn’t tax a public company’s profit twice or double dip in this example, up until the part that explains frank credits made sense to me. The company was taxed on its profits, then after tax the company paid dividends to its shareholders. Ok so why is Australia paying tax credits based on shareholders tax bracket?
In Brazil, dividends are not taxed at all.
But there are no "franking credits". No need of them.
The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
There is a funny paradox here.
thank you
Doesn't cost the government anything. Its all taxpayer money. And should never be seen as governments money.
Also super funds make a fortune and massive returns due to this exact issue as they do not pay tax, so super returns would drop significantly across the board.
Or you could just invest in US multinationals that pay no tax what so ever, and most returns come in the form of capital gains, so the tax is half when you sell. Also, US shares have blown Aussie share’s out of the water over recent history and probability will continue to do so.
Most 9f use are shareholders via super
Hey... we should do this in America!
Owning shares is not owning a company.
No responsibility besides ethics and no liability, means not paying income tax is stealing. God bless Australia for one just follows the rules.
Thats it im buying all the shares in ASX
By the same logic shouldn't we not have to pay tax on anything after paying income tax? That is double taxation as well!
I legit thought this was going to be about the franking privilege from the post office. Turns out, that totally just a US thing. And now, I know a Aussie only thing!
Now you have to tell us about franking privilege from the post office, please. ty
In Brazil, dividends are not taxed at all.
But there are no "franking credits". No need of them.
The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
So we have franking credits, but we have payroll tax, that taxes a tax. Why?
Not levying a tax does not "cost Aus $43b a year" unless you are saying 100% of our money should be paid as Tax and anything not collected is costing the Government.
I reckon his son is gonna be a finance guru by the age of 12
A better solution would be to remove company tax and just tax dividends in the hands of the shareholders.
Or dividends could be payed before the company pays tax then tax dividends as income
It's like saying you shouldn't pay sales tax because you've already paid payroll tax.
So what I am hearing is that this is a tax on the people to fund capital share owners? Nice of the Australian Government to be so open about it
Nope its to stop double taxation. Watch again
My American mind couldn’t comprehend.
The US does 15% if you held the investment over a year. People like to say it isn't fair but same thing. Money is double taxed.
Shareholders rarely set foot in the company(ies) they have a stake in(if ever). It's like you rent out your house, get paid and have to declare that income, because it is an income for you. Yes, the person(s) you rented out your house to got taxed on their salary before you got the rent. So on and so forth. Alot of examples can be given and if one falls, all falls and a 72h countdown begins.
@@qzy-179SanTzxkW I guess that analogy works if you're willing to go along with equating a 0.05% ownership stake/share in a company to fully owning a house that you're renting out. Depends where we want to draw lines.
Wow, I want to move to Australia!
I dont really get how they get away with that though. I assume your workers pay tax? Why does a worker pay tax but a shareholder not? And then I assume ordinary people pay tax when they buy stuff, like we have VAT in the UK, fuel duty etc, isnt that taxing them twice? Its their "Post-Tax" profit, essentially?
Although realistically you could argue a house, car etc is an expense, so its not even profit you are taxing from them, it's actually a revenue tax.
You're revenue taxing workers and then giving a government handout to shareholders, and your population is fine with that? Crazy!
It sounds like swearing to me 😂
Sounds like this only benefits old Australians who are already rich
It doesn't cost the taxpayers any money at all, it is money on which the tax has already been paid, suggesting that it does is like saying the average paye individual costs the taxpayer the other 70% of their pay, because the ATO would like to take it, but can't because they've already paid the tax that is due.
As an employee you shouldn't be paying income tax on your wages as the company has already paid payroll tax.
You forgot to mention the part where you only get a few cents or at most a couple of dollars from the dividends 😑
hmm thanks
Well, I'd be Franked...
Now explain it to me like I'm 5
Is this assuming big business are paying exactly 30% of genuine profits and not forieng royalties?
Depends on the company, sone have foreign income as a taxable item and a franked or partially franked dividend
So the Australian taxpayers foot the bill for the lower tax bracket shareholders?
Why not just cancel the taxes owed on the sub 30% ers instead of forcing the taxpayers to subsidize the remainder?
Or am I understanding this incorrectly?
Your logic implies that taxpayers foot the bill for lower tax bracket wage earners as well.
Which is of course true, low income earners do not pay their fair share.
So… best example of taxation is theft
I still don't get it :(
Wheres the other guys?
Frankingly I don't think this is all that complicated
I still don't understand them.
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Franking credits don’t make you money. They stop you paying tax twice on the same earnings.
It makes too much sense. Don't double tax people
Accept the part where no the fuck it doesn't. That's still income for the shareholders.
Think of it this way. If a company pays me from the profit the company has generated, I still owe income tax. What's the difference? There isn't any.
@@collinsmcrae If a company pays you 70 dollars of post tax distributions, and the government takes your 70 as assessable income without franking credits, then then it could end up that youre paying like 60 cents on the dollar in taxes, which is "I'm leaving for another country" territory. i think you genuinely dont understand or you're a socialist.
@@collinsmcraeso every dollar of company profit should be taxed at 30% and then taxed at your marginal rate as well? Why the hell even have a business. Just give the government all of your money
@@pancakes4140 It's not the companies money once it changes hands, it's the shareholders income. Obviously, rules and regulations around this are going to vary from place to place, but most people do not get dividends in the US tax free simply because the business already pays taxes. My boss already pays taxes on the money he pays me, so what is the difference?
@@collinsmcrae your employer gets to deduct your wages as a tax write off, so you are an expense, not a distribution of profits.
What??
I still don't understand.
The fks a dividend?
Fkn a franking?
I'm lost
Post-tax dividend distributed to shareholders should be completely tax free in the hands of shareholders. Dividend is an appropriation of after-tax profit. It's already taxed, so the govt shouldn't be allowed to tax it again
You could argue by taxing dividends as well companies are incentivized to invest into the business itself and spend more on R&D which ultimately will benefit the business more than paying out huge dividends
I think the issue is the refund.
In Brazil, dividends are not taxed at all.
But there are no "franking credits". No need of them.
The income received from dividends are simply not taken into consideration when calculating the total yearly income for taxes purposes.
@@clemensweiss6163Does it really though? I’ve heard that argument before but at series second glance it looks to me like it instead adds a bit to the cost of capital rate for shareholders.
They then demand a higher dividend relative to the company valuation and as such can make the ROI discount rate used to assess capital projects higher, putting said business off investments if it deems the rates of return as insufficient. In some cases there’s cash hoarding and investing or M&A consolidation instead.
I’m also wary that it indirectly encourages greater leveraging by corporations, ie corporate debt to try rejig the WACC.
companies saying that someone elses income is not taxable because it originally came from them and they paid tax is the most insane thing ever. that would mean no one pays taxes. smh
orrrrrrrrrr just buy bitcoin.
No, it doesn't "cost the taxpayers" anything. We arent "owed" anyone else's money just because they aren't taxed for it.
All Franking Credits do is ensure taxpayers pay tax on their dividends at their marginal rate, the dividends could even increase the taxpayer's marginal tax rate. It's a fallacy that it costs taxpayers anything, it's simply returning overpaid tax to investors.
Think of it this way. Imagine earning $1 in overtime. The 45% marginal rate tax payer would receive $0.55 after paying $0.45 in tax. If that same person received $1 in dividends, $0.30 has already been paid by the company, they pay an additional $0.15 in tax on the dividend, meaning they pay the same $0.45 in tax.
Omfg that's cruel to take money again from poor workers so the rich can live even better.
#Inequality
Worth noting The Labor party brought changes to Franking credits to the 2019 election. Was democratically voted down.
Disappointing especially if you're wealthy enough to pay zero tax and end up with large payments footed by the Australian tax payer.
Can American participate in this franking?
Sure. If you’re not paying the Australian government any taxes you can think of it as getting 100% off your Australian taxes every year, forever. Great deal for Americans.
Franking credits = more Boomer handouts
The less the government gets the better. Unless you feel the government can spend your money better than you.
People are way too happy to be taxed
No, it doesn’t “cost” the taxpayer anything. Government in all its forms is what “costs” taxpayers. Government is 100% cost on the taxpayer. Reducing double taxation only reduces government revenue…which is always a good thing and benefit to the taxpayer. Less government spending, revenue and size is always a benefit and never a cost to actual taxpayers.
Wow, I want to move to Australia!
I dont really get how they get away with that though. I assume your workers pay tax? Why does a worker pay tax but a shareholder not? And then I assume ordinary people pay tax when they buy stuff, like we have VAT in the UK, fuel duty etc, isnt that taxing them twice? Its their "Post-Tax" profit, essentially?
Although realistically you could argue a house, car etc is an expense, so its not even profit you are taxing from them, it's actually a revenue tax.
You're revenue taxing workers and then giving a government handout to shareholders, and your population is fine with that? Crazy!