Franking Credits

PeterO petero at fotodomain.com
Wed Dec 25 03:17:26 EST 2013


Graeme Nichols-3 wrote
> Maf. King wrote:
>> On Wednesday 08 July 2009 04:21:40 Graeme Nichols wrote:
>>> Colin Law wrote:
>>>> 2009/7/7 Graeme Nichols <

> gnichols at .com

> >:
>>>>> 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.
> 
> Hi Maf,
> 
> Thank you. That is what I was wanting to know.
> 
> My Account setup is similar to what you have.
> 
> Current Account:
> Income:Dividends:Franked
> Income:Dividends:Unfranked
> Income:Dividends:Franking credit:(Name of security)
> Equity:Franking Credit
> 
> Your Expenses:Taxes:Dividend Credit is much better so I will follow your 
> example.
> 
> Thanks again.
> 
> -- 
> Kind regards,
> 
> Graeme Nichols.
> ...
> Registered Linux User 381781 (http://counter.li.org/)
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So I have tried this setup (new user) and it appears to corrupt Advanced
Portfolio Report if I include Franking Credits Account as a zero sum
transaction in a split (that's how I get to include dividends in the
performance)

Now if I move Franking Credits from Expenses to Assets/Investments, than
Advanced Portfolio Report works and includes both dividends and franking
credits. I want Franking Credits to be included in the portfolio performance
because I get all of them back. (SMSFs in pension mode do not pay tax on
income)

My question is how to treat a refund cheque from the Tax Office that
contains the above Franking Credits.

At this stage I have followed a "recipe" from this 4 year old thread.
 
I know it is a curly one and specific to Australia, but hopefully there is
someone there who has been there before :-)
Peter



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