Dividends, Imputation and Franking
Applied questions developing the imputation framework.
Applied Questions
Question 1 — Fully franked dividend
A company pays a $60,000 fully franked dividend using a 25% imputation rate. Calculate the franking credit and grossed-up amount.
Question 2 — 30% imputation rate
A $70,000 fully franked dividend uses a 30% imputation rate. Calculate the franking credit.
Question 3 — Franking account
Explain why a company with insufficient franking-account credits cannot simply promise shareholders a fully franked dividend.
Question 4 — Benchmark
A company wants to fully frank dividends to resident individuals but leave dividends to a corporate shareholder unfranked during the same franking period. Identify the benchmark issue.
Question 5 — Shareholder rate
Explain why two shareholders receiving the same fully franked dividend can have different final tax outcomes.
Question 6 — Unfrankable distribution
Explain why the legal classification of a distribution must be resolved before calculating any franking credit.