How Are Dividends Taxed in Australia?

A dividend landing in your account feels like free money. The ATO sees assessable income, but thanks to franking credits the real story is often better than it first looks.

Dividends are income

Every dividend you receive is assessable income in the year you receive it, whether you take it as cash or reinvest it. You declare it in your tax return alongside your salary and other income.

Franked versus unfranked dividends

Australian companies pay tax on their profits before distributing them. When they pass on a dividend from already-taxed profit, it comes franked, with a franking (imputation) credit attached for the tax already paid. Unfranked dividends carry no credit.

How franking credits work

You declare the grossed-up dividend, which is the cash you received plus the franking credit, and then use the credit against your own tax. Here is a fully franked example at the 30% company rate:

Item	Amount
Cash dividend received	$700
Franking credit attached	$300
Grossed-up dividend declared as income	$1,000
Franking credit used against your tax	$300

If your marginal rate is below 30%, the leftover franking credit can reduce tax on your other income or be refunded. If it is above 30%, you top up the difference.

Reinvested dividends still count

Dividend reinvestment plans do not change the tax. The dividend is still assessable income, and the new shares you receive start their own cost base for future capital gains.

Let Summ do the grossing-up

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This article is general information only and does not take your personal circumstances into account. For advice specific to your situation, speak to a registered tax agent.