Franking credits checklist: what should you know before you claim?

By FastBuySale Newsroom · 5 Nov 2026 · 25m ago

How franking credits work

Franking credits checklist, in one line: when an Australian company pays a franked dividend, it passes on a credit for the company tax it has already paid. You include both the dividend and the credit in your assessable income, then use the credit to reduce your tax. If the credits are more than the tax you owe, the Australian Taxation Office (ATO) may refund the difference.

Not everyone can claim. The ATO says you must be eligible to claim the credits, which means meeting the holding period rule and the related payments rule and not being caught by other integrity rules. Some older Australians who do not need to lodge a tax return can apply for a refund using a simpler process.

Australian companies pay tax on their profits. When they distribute those profits as dividends, they can attach franking credits representing the tax already paid. A fully franked dividend carries credits for the full amount of company tax at the company's rate; a partly franked dividend carries fewer.

Your dividend statement shows the franked amount, the unfranked amount and the franking credit. When you lodge your return, you declare the cash dividend plus the franking credit, sometimes called the grossed-up amount, and then claim the credit as a tax offset.

If your marginal tax rate is lower than the company tax rate, the credit covers more than the tax on that dividend. The ATO says that when your franking credits are more than the tax you owe, you may be entitled to a refund of the excess. That is why franking credits are especially valuable to low-income investors and many retirees.

The ATO's refund eligibility covers franked dividends received on or after 1 July 2000, whether directly or through a trust or partnership. Dividends from a New Zealand company that pays Australian franking credits can also qualify.

Readers evaluating Franking credits should separate marketing claims from the actual rule text that governs their account or product. When two summaries disagree, the governing document or statute wins. If a rule depends on your age, filing status, or income band, re-check it when any of those facts change. Life events quietly move people across thresholds they last reviewed years earlier.

Checklist item 1: are you eligible?

The ATO lists three conditions for a refund. You must have received franked dividends, directly or through a trust or partnership. Your tax payable must be less than your franking credits. And you must be entitled to the credits, meaning you meet the holding period rule and related payments rule and are not affected by other integrity rules.

Residency matters too: the ATO says it uses franking information to reduce tax and refund excess credits for Australian residents, after your tax and Medicare levy liabilities are met.

If you receive credits through a partnership or trust, the ATO says both you and the partnership or trust must satisfy the integrity rules, and special rules apply to beneficiaries of non-widely held trusts, including discretionary trusts.

A useful habit is to write down your goal, time horizon, and cash buffer before you change any election related to Franking credits. Decisions made during a stressful week are the ones people reverse later at a cost. Educational explainers like this one cannot replace personalized advice for complex situations such as divorce orders, inherited accounts, or cross-border tax residency. Escalate those cases to a qualified professional.

Checklist item 2: the 45-day holding period rule

To be entitled to the credits, the ATO says you generally need to hold the shares at risk for at least 45 days, not counting the day you acquire them or the day you dispose of them. For preference shares the period is 90 days.

At risk means you have not hedged away most of the ownership risk, for example with options or other arrangements that protect you from price falls.

There is an important exemption for smaller investors. The ATO says the holding period rule applies only if your total franking credit entitlement for the income year is $5,000 or more. That is roughly equal to about $11,667 of fully franked dividends from companies taxed at 30%, or $15,000 from companies taxed at 25%. Below that, the small shareholder exemption means you do not need to meet the holding period rule.

The related payments rule is separate and has no small shareholder exemption. A related payment is one that passes on the benefit of the franked dividend to someone else. If you make, must make or will likely make such a payment, you cannot get the franking credits tax offset even if you meet the holding period rule, and the test applies to each dividend for each parcel of shares.

Keep digital and paper copies of confirmations after every change. Screenshots of election pages, email receipts, and year-end statements make tax season and job changes far less chaotic. Compare fees the same way you would compare two similar listings before you buy: look at what you pay each year, what you get, and whether a simpler option meets the same need.

Checklist item 3: how to claim your refund

If you lodge a tax return, you claim the franking credits in your return and any excess is refunded as part of your assessment.

If you do not need to lodge a return, you can apply for a refund of franking credits separately. The ATO says that for the 2026 tax time it may refund some people automatically if they meet criteria including being over 60 on 30 June 2026, having a refund of $5,460 or less, total dividends of $18,200 or less, and super income streams of $100,000 or less, among other conditions.

If you do not qualify for automatic processing, the ATO's How to apply for a refund of franking credits page sets out the options. The ATO says to lodge your application by 31 October if you are not using a registered tax agent.

Keep every dividend statement. The ATO says they should show the franked amount, unfranked amount, franking credit, date of payment and any tax withheld. Tax is withheld when the company does not have your tax file number and the dividend is partly or fully unfranked.

If a rule depends on your age, filing status, or income band, re-check it when any of those facts change. Life events quietly move people across thresholds they last reviewed years earlier. Automation helps. Calendar reminders for annual reviews, automatic transfers, and beneficiary checkups reduce the chance that a good plan dies from neglect.

Common mistakes to avoid

Declaring only the cash dividend. You must include the franking credit in your income as well as claiming it as an offset; leaving it out understates income and causes errors.

Forgetting dividends from managed funds or trusts. Your annual tax statement from the fund will show franking credits passed through to you.

Selling too soon around a large dividend. If your credits exceed $5,000 in a year, holding shares for less than 45 clear days around the dividend can cost you the credit.

For more Australian money guides see and and plan your retirement income with

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Educational explainers like this one cannot replace personalized advice for complex situations such as divorce orders, inherited accounts, or cross-border tax residency. Escalate those cases to a qualified professional. When in doubt about a number that changes every year, describe your plan qualitatively first, then look up the current official figure for the tax year you care about before you act.

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