Dividend deductions and franking credits are two of the most overlooked tax benefits in Australia—but they could put real money back in your pocket.
Have you ever paid $10,000 or $20,000 in company tax through your Pty Ltd business and thought that money was just… gone?
What if we told you—you could actually get some or even all of that tax back in your personal return?
And if you’re based in Ashfield Inner West Sydney, this is something your local accountant or tax agent should definitely be helping you with.
📘 A Quick Recap: What Are Franking Credits?
Australia operates under a dividend imputation system, meaning income should only be taxed once. When your company earns profit, pays company tax, and then distributes the remaining profit as dividends, you—as the shareholder—receive a franking credit for the tax already paid.
That means you’re not taxed twice.
For base rate entities (most small businesses), the company tax rate is 25%. So when your company pays that tax and then declares a dividend, the ATO gives you credit for it in your personal tax return.
🧠 But Here’s Where It Gets Interesting: Dividend Deductions
While franking credits are fantastic, many investors overlook the dividend deductions they’re legally allowed to claim. These are expenses you incur to earn your dividend income—and they can significantly reduce your taxable income.
✨ Combine franking credits and dividend deductions, and you’ve got a tax refund opportunity many Australians miss entirely.
🧾 Common Dividend Deductions You Can Claim
Here’s what you may be able to deduct if you receive dividend income:
- Interest on loans or margin lending used to buy income-producing shares
- Financial advisor or investment manager fees (if directly related to income generation)
- Brokerage account-keeping fees
- Costs for investment seminars or training
- Tax agent fees related to preparing returns with dividend income
- Investment software and subscriptions (like share tracking tools)
Just remember: deductions must be directly linked to earning income—not just holding investments.
🧮 Real-Life Example: Peter Black Pty Ltd
Let’s say your company earns $100,000 in net profit and pays 25% tax = $25,000 in tax paid. You’re left with $75,000 post-tax profit.
In Year 1, you declare a dividend of $17,000 to yourself. The franking credit attached is:
$17,000 × (25 ÷ 75) = $5,666.67
Now let’s add some dividend deductions.
Peter also paid:
- $1,200 interest on an investment loan
- $200 in brokerage fees
- $330 in software subscriptions
That’s $1,730 in total deductions.
Outcome:
- Assessable income = $17,000 + $5,666.67 = $22,666.67
- Less dividend deductions = $1,730
- Net taxable income = $20,936.67
If Peter’s personal tax rate is below the company rate (e.g. under the tax-free threshold or 19%), he may not owe any tax—and could even get a refund of the full $5,666.67.
Multiply that over several years of dividends, and we’re talking $20,000+ in refunds most small business owners don’t realise they can access.
🔍 Case Study: Sarah from Ashfield
Sarah, a retiree in Summer Hill, had received franked dividends for years but never claimed interest from her margin loan or her trading platform fees.
After working with EndureGo Tax, she amended two years of returns and received an extra $1,500 in refunds.
💬 “I thought my tax was already done. Turns out, it was only half the story.” – Sarah, Summer Hill
🛠️ Why Timing and Planning Matter
To get the most from dividend deductions and franking credits, your accountant should:
- Time dividend payments in low-income years
- Track company tax paid and maintain a Franking Account Ledger
- Match deductible investment expenses to dividend income
- Avoid common deduction mistakes (like claiming the cost of shares—that’s capital, not deductible)
❌ Mistakes to Avoid
- Forgetting to report franking credits – you’ll miss your refund
- Claiming the cost of shares – that’s not deductible
- Overclaiming personal expenses not tied to investment income
🧭 How EndureGo Tax Can Help
We’ve worked with hundreds of local investors, retirees, and business owners across Inner West Sydney to help them:
- Unlock cash refunds using franking credits
- Properly claim dividend-related deductions
- Plan company dividends to maximise tax efficiency
- Understand the true after-tax value of investments
You shouldn’t have to pay tax twice—and you shouldn’t leave money with the ATO just because the paperwork seems confusing.
✅ Book a FREE 15-Minute Consult Today
If you’ve paid company tax or received dividends but haven’t claimed dividend deductions and franking credits, you could be missing thousands in refunds.
Let’s change that.
📍 Ashfield Inner West
📞 1800 841 312
📧 hello@endurego.com.au
🌐 www.endurego.com.au
💬 “It’s not about paying less tax—it’s about not paying twice.”
– John Cheng FCPA, Director of EndureGo Tax
