A shareholder whose marginal tax rate is equal to the company's tax rate will not be personally liable for any tax upon fully franked dividends paid by the company but would face a tax liability for any partial or unfranked dividends.

Question

Quizplus · Accepted Answer

This is because fully franked dividends have already had the company tax paid on them, so the shareholder receives a tax credit for that amount which can offset their own tax liability. However, if the dividend is only partially franked or unfranked, the shareholder will need to pay tax on the full amount received without receiving a credit for any company tax paid.

A Shareholder Whose Marginal Tax Rate Is Equal to the Company's