[GNC] Financial Account Structure for Australian Shares and ETFs

[davidcousens49 at gmail.com]

flywire

The following has some information of the treatment of franking credits in the
hads of an investor.
https://www.insightaccounting.com.au/2017/03/share-dividend-income-franking-credits/

It would appear that generally they form a part of your taxble income but would
need to be recorded in a separate income account/category. 

If your assessed tax payable then the amount of the franking credit is deducted
from you assessed tax if it exceeds your franking credit totals and if your
assessed tax is less than the total of your franking credits, then you may be
entitled to a refund of the difference between your franking credit total and
your assessed tax payable if you ar eligible.
https://www.ato.gov.au/Individuals/Investments-and-assets/in-detail/investing-in-shares/refunding-franking-credits---individuals/?page=2#:~:text=Total%20franking%20credits%20entitlement%20of%20%245%2C000%20or%20more&text=To%20be%20eligible%20for%20a,day%20of%20acquisition%20or%20disposal).

If you are not eligible then you do not need to gross up your income by the
amount of the franking tax credits. It would generally be wise to record the
franking tax credits in a separate taxable income account in any case, then at
tax time make the decision as to whether you are entitled to the tax credit
dpending on whether you meet the requirements below.

I personally use an appropriately named asset account as the second account for
the transactions recording the receipt of franking credits and at tax time would
zero that account (credit it) in reducing the tax payable liability (debit this
account) or in determining the tax refund if you are eligible. (I am normally
eligible).

If you are not eligible under the above provisions at tax time, then you do not
have to include the franking tax credits as part of your income, in which case
you would add a reversing transaction to the transactions recordinmg the
franking credits, zeroing the asset account and the franking credit income
account annotated accordingly.

This is my personal approach to recording franking credits but should not be
interpreted as accounting advice. If in any doubt consult an accountant.

David Cousens







On Thu, 2021-08-26 at 23:37 +1000, flywire wrote:
> The guide leaves stock and mutual fund financial account structure very
> open and search only showed one Franking/Franked thread in the recent past.
> I'm wondering what people do in practice.
> 
> Share dividends looks doable: Bank deposit = Unfranked + Franked - Tax
> Withheld. Franked has unpaid Franking Credits. Where does the contra
> account for Franking Credits sit? (I use a fairly simple account tree.)
> 
> ETFs: have about 10 tax codes that don't bear much resemblance to actual
> payments. How do people handle these? (I realise financial records only go
> so far preparing for tax. It's looking like a spreadsheet.)
> 
> I'm not looking at tracking physical shares/ETFs in GnuCash.
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