- Franking credit
A franking credit is a nominal unit of tax paid by
companiespaying tax in countries that have a dividend imputationsystem. Franking credits are passed on to shareholdersalong with dividends. Shareholders include in their assessable incomenot the dividends received but the grossed-up amount back-calculated from that dividend and the current tax rate, then have their income taxpayable calculated thereupon, then use franking credits to offset tax payable at the rate of a dollar per credit. In Australia& New Zealandthe end result is the elimination of double taxationupon company profits.
Formula of Franking Credit.
tc / (1 - tc).
"* tc = company tax rate."
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