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

[Michael Gordon]

Peter, Thank you very much for further insights into how to handle
dividends, franking and the rest. I'm letting all the information so
generously supplied by all of you mature in my subconscious while I
complete entering the stocks, funds etc.
I did have a dabble with dividends early on, got confused and posted my
query, and have delayed getting back to dividends while I absorb and digest
the suggestions of the various possible approaches.
As I (very) slowly get familiar with GnuCash and 'double entry bookkeeping'
I can see that there is great flexibility and am almost looking forward to
tackling dividends in a few day's time!
Thanks again,
Mike.


On 13 July 2013 14:03, prl <prl at ozemail.com.au> wrote:

>  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> 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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>>
>
>