You are a shareholder in a corporation which has announced a profit of $6 per share, of which it retains $2 for reinvestment and distributes the rest as dividend payments. A franking credit of $1.71 per share attaches to the dividend. Given that the personal tax rate is 35%, how much tax must you pay per share?

Question

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The dividend is $4 per share ($6 - $2). The franking credit is $1.71 per share. The taxable dividend is $2.29 per share ($4 - $1.71). The tax payable is $0.28 per share ($2.29 x 35%).

You Are a Shareholder in a Corporation Which Has Announced