1 / 7

Shares and Taxation

Shares and Taxation. Taxation implications of owning shares. Tax on Dividends. Before 1987 a company would pay tax on their profits (dividends) and then you as a shareholder would pay tax on your income – so the Government was kind of getting 2 lots of tax out of one payment.

susane
Download Presentation

Shares and Taxation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Shares and Taxation Taxation implications of owning shares

  2. Tax on Dividends • Before 1987 a company would pay tax on their profits (dividends) and then you as a shareholder would pay tax on your income – so the Government was kind of getting 2 lots of tax out of one payment. • DIVIDEND IMPUTATION - is a method that gives tax advantages to shareholders who receive dividends. • FULLY FRANKED Dividends have the tax paid on them by the company at the company rate 30%. • This means when you get the dividend tax has already been paid – giving you the possibility of : • not paying tax on the dividends • Paying reduced tax on the dividends • Getting money back in the form of a tax return • Depending on your marginal tax rate

  3. This system has benefits for shareholders, making dividend payments more attractive. • If your marginal tax rate is below the company tax rate you will get a refund!

  4. Calculating the Imputation Credit • In all these calculations we assume that the Business Tax rate is 30% 0.24 x 1260 302.40 x 30/70 30 is the tax rate

  5. Calculate the tax owing and then the after tax return if you had the shares above and had a marginal tax rate of : (a) 17% and (b) 47%. Income declared = Unfranked amount + Franked amount + Imputation Credit Income Declared = 379.5 + 162.64 = 542.14 Tax Liability = Income declared x marginal tax rate Tax Liability = 542.14 x 17% = $92.16 Tax Owing = Tax liability – Imputation Credit Tax Owing = 92.16 – 162.64 = -70.48 You are owed $70.48. After Tax Return 379.50 + 70.48 = $449.48

  6. Calculate the tax owing and then the after tax return if you had the shares above and had a marginal tax rate of : (a) 17% and (b) 47%. Income declared = Unfranked amount + Franked amount + Imputation Credit Income Declared = 379.5 + 162.64 = 542.14 Tax Liability = Income declared x marginal tax rate Tax Liability = 542.14 x 47% = $254.81 Tax Owing = Tax liability – Imputation Credit Tax Owing = 254.81 – 162.64 = 92.17 You are owe $92.17 After Tax Return 379.50 – 92.17 = $287.33

  7. Calculating the Imputation Credit • In all these calculations we assume that the Business Tax rate is 30% 0.24 x 1260 302.40 x 30/70 30 is the tax rate

More Related