How to best handle Imputation Credit (Australia); Tax related

[prl]

Hi, Michael.

I don't have any shares that aren't fully franked, so I don't even have 
to ignore unfranked dividends. :)

I do record dividends (sum of franked dividends and the unfranked 
dividends that I don't have) in Gnucash because that does show up as 
income in the accounts I manage in GnuCash, either as a direct payment 
to a bank account, or as a payment into a share register (where have a 
dividend reinvestment plan and the dividends are paid as shares).

When I do my tax return, I take the dividends and franking credit values 
straight off the dividend statements. I keep the current year's dividend 
statements in my file for the current year's tax, and then move them to 
my investments file when the tax return is done (I need to keep track of 
the share acquisitions from a reinvestment plan for capital gains tax 
purposes).

As for the imputation credit, you can look on it as an expense paid to 
the ATO by the share issuer that the ATO later pays you back (possibly 
in part) as income, as Maf King suggested, regard it as an asset that 
the ATO holds on your behalf as I suggested, or ignore it within 
GnuCash, as I actually do, except for the gross payments of dividends 
into my accounts, and the payment of the total annual tax debt to the ATO.

If your tax circumstances are such that the ATO always pays you back the 
whole of the imputation credit, then the asset approach may be better 
for your needs, since you'll always have the total imputation credit 
available for payment to you explicitly in the Gnucash account. 
Otherwise, the dividend payments need to be treated as taxable income 
where the tax due is partly offset by the imputation credit, and then it 
all gets rather messy (which is one reason why I don't bother).

I'm not an accountant, and I know little of accounting practice. I 
simply use GnuCash in the way that seems the best effort/benefit 
tradeoff for my needs.

Cheers,
Peter

On 12/07/13 19:53, Michael Gordon wrote:
> Thank you, Peter. Have to give the handling - or ignoring - of 
> Imputation credit some more thought.
>
> Tax - not interested in doing anything complicated with this. My 
> interest was mostly if it eased the handling of Imputation credit.
>
> Do you bother to separately record Franked and Unfranked dividends? 
> I'm beginning to wonder if that's worth the bother, too.
>
> For years I used a program I wrote in C++ but now my compiler isn't 
> compatible with the newer operating systems so any updates to the 
> program are an issue plus the fact that my C++ is very rusty indeed. 
> The program had the great advantage that I could arrange things how I 
> liked, though, as an engineer, these arrangements didn't follow proper 
> accounting procedures! With GnuCash I have to do things 'right' and I 
> think also I should revise my thoughts on was is really worth the 
> trouble of entering and tracking.
>
> Mike.
>
>
> On 12 July 2013 17:56, prl <prl at ozemail.com.au 
> <mailto:prl at ozemail.com.au>> wrote:
>
>     Hi, Michael.
>
>     I don't record Imputation Credits* in Gnucash. But then I don't
>     put any of my tax through GnuCash, and I don't normally get a
>     payment back from my tax. I just pay any excess owing to the ATO
>     into an Expenses:Tax account. But I only ever have a few hundred
>     dollars in imputation credits anyway. If you have a large amount
>     relative to your income, then it may be worth the effort tracking it.
>
>     The tax arrangements for superannuation pensions are too
>     complicated for me to try to deal with them through GnuCash in any
>     way that comes close to reflecting reality. I only get an annual
>     statement of the tax on my pension anyway (at the end of the FY).
>     I just budget for what I guess I'll have to pay the ATO at the end
>     of the year.
>
>     You could make an Asset:Imputation Credit account, pay into it
>     when you get your dividend statements, and regard some (or all) of
>     your tax return cheque as having come from that from that account,
>     and do a split payment into the account that you pay the cheque into.
>
>     On the Tax Related checkbox, I've never seen anything remotely
>     related to Australian income tax in Gnucash. But that may be
>     because I've simply assumed there won't be anything and haven't
>     looked hard enough :)
>
>     * For non-Australian readers, Imputation Credits are effectively
>     an allowance for the tax the company has already paid in company
>     tax on profits that are being redistributed as dividends. If your
>     marginal income tax rate is below the company tax rate, Imputation
>     Credits are effectively negative taxation on the dividends.
>
>     Cheers,
>     Peter
>
>
>     On 12/07/13 11:05, Michael Gordon wrote:
>
>         I'm running GnuCash 2.4.13 on Windows 8.
>
>         1. Imputation Credit
>         Just starting to enter data and am stuck on how best to handle
>         Imputation
>         credit when recording dividend income.
>         In Australia, those with low income tax rates can claim back
>         tax that has
>         been paid by companies when they declare dividends.
>         A dividend statement has three elements:
>         Franked amount (the amount on which the company has paid tax)
>         Unfranked amount (the amount on which the company has NOT paid
>         tax)
>         Imputation or Franking credit (the maximum amount that you may
>         be able to
>         claim back from the government when filing your tax return)
>
>         So, the cash paid at dividend time is the total of Franked and
>         Unfranked.
>         I know that I can record this as a split transaction.
>
>         But what to do about the Imputation Credit? As a retiree I get
>         most if not
>         all of this so it is a kind of delayed income, but I'd like to
>         keep track
>         of it as dividends are paid.
>
>         2. Tax related. This check box appears to be unavailable. Only
>         viable for
>         US users, perhaps?
>
>         Mike.
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