[GNC] Entering Dividend Confusion

[David Cousens]

Australia has a provision in its taxation law to prevent double taxation of the
component of profits of companies paid out to shareholders as dividends. As
company tax has already been paid on it, the shareholder is credited with a
"franking credit" as part of the dividend which can be used to offset the tax
payable. If the company tax (30%) paid is less than the individual's tax rate,
then they only have to pay the difference between their marginal tax rate and
the company tax. If their tax rate is less than the company tax , they get a
refund of the difference in the tax rates. Companies can choose to pay dividends
from profits before or after the company tax has been paid. If their dividends
are paid out of pre-tax profits, then the shareholder doesn't receive the
franking credit and they pay the full tax rate on the dividend, their dividends
are referred to as unfranked (untaxed).

David Cousens

On Sat, 2023-01-21 at 11:11 -0600, R Losey wrote:
> You need to make sure that your mutual fund or stock is set up as an
> account type of "Mutual Fund" or "Stock" (right-click on the account,
> select "Edit" and find the Account Type in the lower left corner. I don't
> know if it matters, but I always have two-line entry (Preference->Register
> Defaults (check box for Double Line Mode)
> 
> Reinvested dividends are entered on the stock or mutual fund; the company
> should inform you the amount, and the shares reinvested.  So, if you own
> stock XYZ that pays $90 in dividends, reinvested as 3.600 shares at
> $25/share, in the XYZ account, you'd enter the appropriate category (Taxed,
> or Untaxed), and $90 for the amount and 3.600 for the shares (GnuCash will
> calculate the price for you).
> 
> I'm not clear on what a "Tax credit" is - does that mean that they have
> taken taxes out of the dividend... so that, in the example above, you have
> a $90 dividend, but they take $10 in taxes, leaving 80 to be reinvested
> (3.200 shares at $25/share). It would be a similar entry, but I'd use a
> split transaction; in the XYZ account, I'd record a purchase of 3.200
> shares at $25/share for $80, with the taxed dividends being $90 and a tax
> credit of $10.
> 
> Hope this helps.
> 
> On Sat, Jan 21, 2023 at 2:15 AM Gnucash Xboxboy Mageia <
> xboxboy.mageia+gnucash at gmail.com> wrote:
> 
> > Hi all,
> > 
> > I'm trying to enter dividends, I'm following this video
> > https://www.youtube.com/watch?v=WRNoabz1WSo but his page shows columns
> > with shares/price/debt/credit, but mine has just buy/sell any ideas? How do
> > I get those columns?
> > 
> > I'm in Australia, so I wanted to enter dividend payments as 3 types:
> > Taxed (franked), Untaxed (unfranked) and the Tax credit (input credit),
> > and I reinvest the dividends typically.
> > 
> > Thanks: All advice welcomed.
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