NodeSaver

§ — Investing

How much does your portfolio actually pay after tax?

Australian dividend imputation turns franking credits into real cash — or a tax refund. Enter your portfolio size, yield, and franking level to see your exact after-tax income and compare fully franked versus unfranked dividends side by side.

Updated · Jun 2026·Source: ATO · 2025–26 rates·Read · 6 min

Your inputs

A$
%
Franking level
Company tax rate
Your marginal tax rate · 2025–26
Dividend reinvestment (DRIP)?

Inputs local. Nothing sent anywhere.

The result

Annual dividend after tax

$6,971

$1,029 net tax payable after franking offset

Cash dividend
$8,000
Franking credit
$3,429
Grossed-up
$11,429
Effective tax rate
12.9%

How we calculated it

Annual cash dividend$8,000
+ Franking credit (100% franked, 30% corp tax)+ $3,429
= Grossed-up dividend$11,429
− Tax at 39% marginal rate− $4,457
+ Franking credit offset+ $3,429
= Net tax payable− $1,029
After-tax dividend income$6,971

Franking comparison

Same portfolio and yield — unfranked vs your current setting

0% franked100% franked
Cash dividend$8,000$8,000
Franking credit$0$3,429
Net tax payable$3,120$1,029
After-tax dividend$4,880$6,971

Advertisement

Australia's dividend imputation system, explained

Most countries tax corporate profits twice: once when the company earns them, and again when shareholders receive dividends. Australia eliminated this double taxation in 1987 through the dividend imputation system — one of the most shareholder-friendly tax regimes in the world.

When an Australian company earns $1,000 profit and pays 30% corporate tax, it distributes the remaining $700 as a fully franked dividend. Attached is a $300 franking credit — a voucher confirming $300 of tax was already paid on your behalf. The ATO treats you as if you earned $1,000 pre-tax, charges you at your marginal rate, and credits the $300 already paid.

If your marginal rate is below 30%, the credit exceeds your tax — the ATO pays you the difference in cash. A retiree paying 0% tax on a $700 fully franked dividend receives the entire $300 credit as a refund, effectively turning a $700 payment into $1,000 in their pocket.

The grossed-up dividend formula: Franking credit = cash dividend × (corporate rate ÷ (1 − corporate rate)). At 30%: credit = cash × 3/7. For base-rate entities paying 25% tax: credit = cash × 1/3 (smaller credit, smaller grossed-up income).

Reference yields — what to expect from Australian shares

Australian shares pay among the highest dividend yields in the world, partly because the imputation system encourages companies to return profits rather than accumulate cash. Here are typical cash yields for common investment categories:

  • ASX 200 average (~4.0% cash yield): The broad market index. Includes both high-yielding banks and miners alongside lower-yielding technology and healthcare stocks. Average franking around 70–80%.
  • High-yield ETFs like VHY (~5.5% cash yield): Vanguard's High Yield Australian Shares ETF screens for stocks with above-average dividend yields. Distributions are typically 80–90% franked. Concentrated in financials and materials.
  • Big 4 banks (~5–6% cash yield, 100% franked): CBA, NAB, ANZ and Westpac have historically maintained high, fully franked dividends. The 100% franking makes these especially attractive for lower-rate taxpayers and super funds.
  • BHP and Rio Tinto (~6–7% yield, ~50% franked): The major miners pay variable dividends tied to commodity prices. They often have large overseas earnings that bear no Australian corporate tax, resulting in partial franking — typically around 50% in recent years.

§ Letters & replies

Dividend income, answered.

Common questions about Australian dividend income, franking credits, and after-tax returns.

What is a franking credit and how does it reduce tax?+ open

A franking credit (also called an imputation credit) represents the corporate tax an Australian company already paid on its profits before distributing a dividend. When you receive a franked dividend, you declare the grossed-up amount (cash plus credit) as income, then claim the pre-paid corporate tax as an offset against your own income tax liability. If the credit exceeds your tax, the ATO refunds the difference in cash.

Can I get a refund of franking credits if I pay no tax?+ open

Yes. Since July 2000, Australia allows franking credits to be fully refundable. If your total income tax liability is zero — or less than the franking credits you received — the ATO pays you the difference in cash. This is particularly valuable for retirees living on tax-free superannuation income, self-managed super funds in pension phase, and low-income investors under the tax-free threshold.

What is a good dividend yield for Australian shares?+ open

The ASX 200 has historically delivered a cash dividend yield of around 4% per annum, which is higher than most international markets due to the dividend imputation system encouraging companies to distribute profits rather than retain them. High-yield ETFs like Vanguard High Yield Australian Shares ETF (VHY) typically yield around 5–5.5%. The Big 4 banks (CBA, NAB, ANZ, WBC) have historically yielded 5–6% with 100% franking, while miners like BHP and Rio Tinto often yield 6–7% with partial franking.

How do I calculate the grossed-up dividend?+ open

The grossed-up dividend equals the cash dividend plus the franking credit. For a fully franked dividend with the standard 30% corporate tax rate: Franking credit = cash dividend × (0.30 ÷ 0.70) = cash × 3/7. A $700 fully franked dividend carries a $300 franking credit for a $1,000 grossed-up dividend. You declare $1,000 on your tax return and claim $300 as an offset. For a 25% base-rate entity: credit = cash × (0.25 ÷ 0.75) = cash × 1/3.

Are dividends from ETFs franked?+ open

It depends on the underlying holdings. Australian share ETFs (like VAS or VHY) pass through the franking credits from their portfolio companies, so distributions are typically partially franked — the effective franking level reflects the franking percentage of the underlying shares. International share ETFs (like VGS or IVV) invest in overseas companies that pay no Australian corporate tax, so their distributions carry no franking credits. Always check the fund's distribution statement for the exact franking percentage.

Related calculators

§ — Tax

Franking credits calculator

Gross up a single franked dividend and see the exact ATO refund or liability.

§ — Investing

FIRE calculator

Find your financial independence number and the age at which compound growth covers your expenses.

§ — Investing

ETF fee drag calculator

See how management expense ratios compound into significant wealth erosion over time.