Accounting for Shares on Australian Exchange.

[Graeme Nichols]

Doug Laidlaw wrote:
> It is good to have another Aussie here.
> 
> Thanks for putting me right on the franking system.  The only point I was 
> making was how to deal with the franking credit.  Quicken has a large sum 
> which I assume is the value of the portfolio, but dividends REDUCE the 
> amount.  They are an income event, and shouldn't be posted to the asset at 
> all.  Quicken does however handle franking credits very well.
> 
> Something is wrong at the moment.  The Account type is set to Asset, so that 
> must be the reason, according to your P.S.
> 
> Doug.

Hi Doug,

Gnucash doesn't have any way of dealing with the franking credit, I'm on 
2.0.4 btw, and as far as I have ever been able to discover never has.

Quicken Personal Plus 2007 handles the whole dividend disbursements very 
well. So did the previous versions. Its all a bit academic though.

In reality, the main things to keep track of are the transactions for 
the stock and the actual dividend paid every six months.

You need to keep track of the stock transactions for obvious reasons not 
least of which are the taxation implications of capital gain/loss.

You need to keep track of the dividends paid, again for the obvious 
reasons of tax obligations, but also so that you can complete your tax 
each year and know how much income you are receiving each year from your 
investments.

You probably already know this but you can work out how much tax has 
already been paid on your dividends simply by looking at the imputation 
credit. This is the amount of tax that has been paid on your share of 
the after tax profit of the company declared as the 'franked amount'. If 
you have any 'unfranked amount' shown on your dividend notice no tax has 
been paid on that amount and you are to pay tax on that amount at your 
marginal rate. If you add the 'franked amount' to the 'imputation 
(franking) credit' you will have the before tax value of your dividend. 
30% of that amount should equal the 'imputation credit'

When the tax office assesses your income they add all the amounts 
(franked, unfranked and imputation) together to arrive at your before 
tax dividend and add that amount to your other income to arrive at your 
taxable income. The tax on that taxable income is then reduced by the 
amount of the 'imputation credit'. Appears convoluted but is really 
pretty simple.

If you really want to know the amount of tax credit you have from your 
investments and the tax liability of the unfranked amount you may have 
received you could set up three other accounts under the dividend 
account which can record the three amounts, franked, unfranked and 
imputation credit and split these entries so that the actual amount 
received ends up in the dividend account. At tax time you could print 
these amounts off. Or you could add the two/three amounts together and 
use the split to enter them in the dividend account.

Dividend account = actual amount received
Dividend account <==> Franked account = franking amount
Dividend account <==> Unfranked account = unfranked amount
Dividend account <==> Imputation account = imputation amount

Set them up as debit or credit and each should show your income and tax 
liability for that dividend. But, being the lazy bugger I am, I do not 
bother :-)

My apologies if I have just tried to teach my grandmother to suck eggs.

I keep the dividend notices and enter the amounts from them straight 
into my tax form at tax time. I do my tax online.

Of course, the tax liability of these dividends will vary depending on 
your total taxable income and your marginal tax rate and, in my case, is 
not known until the end of the tax year :-) Another reason not to bother 
trying to track the various constituent amounts.


-- 

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Kind regards,

Graeme.
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Download my GnuPG public key from:-
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