Q3: Application Question

Monique has shares in an Australian mining company, JKL Ltd. (company tax rate 30%). She has received a final dividend statement for the year. Monique needs you to explain some things about the statement to her. The details are as follows:

• Dividend per share (A$): 24 cents • Number of shares: 750 • Franking credit (A$): $46.29

a. Explain the difference between ‘(fully) franked dividends’, ‘partially franked dividend’, and ‘unfranked dividends’.

b. Is JKL share dividend fully or partially franked, or unfranked?

c. Explain how the ‘franking credit’ would be treated in the calculation of Monique’s tax payable for the year.

d. Suppose Monique earns a salary of $45,000, has no other income apart from the shares and does not have private health insurance. Calculate her tax payable in this situation.

Learning objectives 1, 2, 3