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Re: Australian Dividend Franking[ Message Board ] [ Archives ] [ Search ] Posted by Gary Wilson on May 10, 2006 at 01:52:43: In Reply to: Re: Australian Dividend Franking posted by Mark on April 15, 2006 at 11:08:45: Mark, There are a couple of issues here; irrespective of juristiction many investors receive dividends that may be simple taxable cash or be net of withholding tax and/or carry a tax credit (so called franking credits in Australia). Therfore as discussed users need to add back withholding tax & tax credits to ensure all dividends are placed on the same basis. In other words gross dividend value is received & it can be 100% cash or it can be cash plus some other non cash values. I have called the cash component in FM "Dividends" & placed non cash (dividend) value in "other" (distribitions). [I presume this has no yield impact?] This treatment does give me a reminder about this issue when I print out a Distributions Report - however I am now considering putting this grossed up value all in the Dividend category (for simplicities sake). In any case, to this extent, there is no big deal in accounting for Australia franking credits. The issue arises for those who reconcile to cash account (I don't use this feature). Possibly a simple solution is to provide for cash & non cash elements for dividend value. As for after tax yields etc; having thought about this over my years of using FM I can say its obviously what all investors ultimately focus on - but I think you are right to be reluctant to go down this track - it could be a never ending nightmare which would detract from a proven product. ;-)
: : Mark, : : I would also greatly appreciate some support for Australian dividend franking. : : I'm primarily interested in seeing the real performance of the share and so it is not critical for me to see the franking credit as a deposit to a cash account. : : The benefit of the credit does depend on your marginal tax rate, which,in my case, is a tax rate of 0% as I run a Super Fund in Pension mode. Accordingly the fund will eventually (after the end of the current tax year) receive from the Tax Department the full 30% tax that has already been paid by the company. : : A Super Fund in accumulation mode (not paying a pension) may be paying tax at 15% so would get 15% (30%-15%) back, whilst an individual may be on a top rate of tax (say 49%) and therefore be required to pay an additional 19% in tax. : : In the vast majority of cases the marginal Tax Rate will be known for the full year so a possible solution may be for the user to be able to pre-set the marginal tax rate for the year, then only enter the franked and non-franked components and have FM calculate the amount refunded or taxed and use the result as part of the performance calculation. : : I appreciate this presents a problem for FM as it is a variation to your policy of basing calculations on pre-tax figutes, and I also hasten to add that I am not an accountant! : : Nevertheless support for this Australian "oddity" would be much appreciated and further enhance your already excellent program. : : Don : : Thanks for the post. As I'm sure you can understand I'm pretty leary of adding anything relating to tax rates... :) I can see a new distribution type for franked distributions, and the user can choose to enter the appropriate amount, taking into account their own tax rate if they wish. : With this new type you would be able to report on it separately, and have the option to not automatically put it into the default cash account. It would be treated just like any other distribution type for purposes of return/performance calculations. : Thanks,
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