Partially Franked Dividend
A dividend where only part of the underlying profits have been taxed in Australia, so only partial franking credits are attached.
A partially franked dividend is one where the company has paid Australian company tax on only a portion of the profits being distributed. This means some franking credits are attached, but less than the maximum amount. For example, a 50% franked dividend of $70 from a company taxed at 30% would carry $15 in franking credits (half the maximum $30), with $35 being franked and $35 being unfranked.
Partially franked dividends are common for companies that earn a mix of Australian and international income, or companies that have some tax concessions or offsets reducing their effective tax rate below the statutory rate. Mining companies with significant overseas operations or companies receiving R&D tax incentives may pay partially franked dividends.
For tax purposes, you include the cash dividend plus the franking credit in your assessable income, and claim the franking credit as a tax offset. Using the example above: assessable income = $70 + $15 = $85, with a $15 tax offset. The franking percentage is stated in the dividend statement your company or fund provides, and your tax software or tax agent will calculate the correct grossed-up amount and offset.