Franking Credits

[Maf. King]

On Wednesday 08 July 2009 04:21:40 Graeme Nichols wrote:
> Colin Law wrote:
> > 2009/7/7 Graeme Nichols <gnichols at tpg.com.au>:
> >> Hi,
<SNIP>
> So, this 'Franking Credit' is tax that has been paid to the Australian
> Tax Office on one's behalf by the Company.
>
> This needs to be kept track of because when filling in one's tax return
> dividends have to broken into 'Franked' & 'Unfranked'. The 'Franking
> Credit' has to be entered into the Tax form as well so it will be used
> to offset one's tax liability.
>
> The question is: In double entry accounting there are two accounts
> involved. I can easily set up a 'Franking Credit' asset account but I am
> not sure of how to set up the other, or 'from' account.
>
> I guess I could use Equity - Opening Balances or Equity - Franking
> Credits'.
>
> I was wondering how other GnuCash users handle it.


Hi Graeme,

Ahh, I understand the question now.  The UK handles dividends and tax in a 
similar way, but I haven't heard the term Franked credit before.

Over here, dividend payments are made with a 10% "tax credit" which sounds 
similar as it can reduce personal tax in some circumstances, but one never 
actually holds the cash.  However, the tax return asks for the total dividend 
received including the credit, so I agree, that tracking it is a good idea.

I have an account structure like this:
Assets:Chequing
Income:Dividends:nett
Income:Dividends:tax credit
Expenses:Taxes:Dividend Credit

Dividends payments then are a 4 way split transaction in GC - the actual 
payment goes between my chequing account and income:Div:nett, and the tax 
credit component goes between I:D:tax credit and E:T:Dividend credit 
accounts.

Worked for me during for my most recent tax return!

HTH,
Maf.