Webster Holding Ltd is a company which owns a number of fashion brands. If Webster Holding makes a taxable profit of $1 000 000 in the 2016 financial year and the company tax rate is 30%, what is the maximum franking credit that can attach to a dividend paid from that profit?
A)$700 000
B)$1 000 000
C)$300 000
D)$0

Question

Quizplus · Accepted Answer

The maximum franking credit that can attach to a dividend paid from the profit of $1 000 000 would be calculated as 30% of the dividend paid out, which is $300 000 (30% x $1 000 000). Therefore, the correct choice is C. Option A is incorrect as it is the actual amount of tax paid on the profit. Option B is incorrect as it suggests that the entire profit can be franked, which is not possible as franking cannot exceed the company's actual tax paid. Option D is incorrect as every profitable company is required to pay taxes which is used by the government for funding public institutions and services.

Webster Holding Ltd Is a Company Which Owns a Number