Dividends in Australia – What They Are, Types, Tax Rules & How to Report

A dividend is a payment made by a company to its shareholders, typically from profits. In Australia, dividends are an important part of both personal and business income, and they come with specific tax treatment and reporting obligations.

There are two key types of dividends: franked (with tax credits attached) and unfranked (without credits). At Ozobooks, we help clients manage dividend declarations, statements, and ATO compliance.

Types of Dividends

• Franked Dividend: Tax has already been paid at the company level. Comes with franking credits.
  
• Unfranked Dividend: No company tax paid. Taxed fully as part of your income.
  
• Interim Dividend: Paid before financial year-end.
  
• Final Dividend: Declared after year-end, based on final profit figures.
  

Franking Credits Explained

Franking credits represent the company tax already paid on the profits distributed to shareholders. These credits can offset your individual tax liability.

Example: You receive a $700 franked dividend with $300 franking credit. Your taxable income is $1,000, but the $300 credit reduces your tax payable.

Who Can Receive Dividends?

• Individual shareholders
  
• Trusts
  
• SMSFs (Self-Managed Super Funds)
  
• Other companies (in inter-company dividends)
  

Dividend Reporting

• Reported in your individual or business tax return
  
• Must include franking credits if applicable
  
• Requires a dividend statement from the issuing company
  

Company Obligations When Paying Dividends

• Must declare dividend via board resolution
  
• Issue dividend statement to shareholders
  
• Report via ATO’s Annual Report for Shareholders
  

Ozobooks helps small company owners ensure dividends are declared legally and tax efficiently.

How Ozobooks Helps

• Prepares and issues dividend statements
  
• Calculates franking credits
  
• Ensures compliance with ASIC and ATO
  
• Handles tax return reporting for directors and shareholders
  

FAQ:

Q1: Are dividends considered income?
Yes. Dividends are taxable and must be reported in your return.

Q2: What is a franked dividend?
It includes a credit for tax already paid by the company.

Q3: Can a trust receive dividends?
Yes, and it must distribute them correctly to beneficiaries.

Q4: Do I need to lodge anything for dividend income?
Yes. Dividends (with franking credits) go in your annual tax return.