How dividend tax works in Australia
Resident individuals include dividends in taxable income. If the dividend is franked, a franking credit is also included and then credited against the tax bill. Fully franked dividends from a 30% company can be highly tax-efficient for lower-bracket shareholders and still valuable for higher-bracket ones.
Unfranked dividends do not carry company-tax credits, so the shareholder pays marginal rates on the cash dividend without that offset. Trusts, SMSFs and companies each use the franking system differently.
Non-resident shareholders are often subject to dividend withholding tax on unfranked dividends, commonly 30% under domestic law and lower under many tax treaties. Franked dividends paid to non-residents are often free of Australian dividend withholding tax.
Tax rates at a glance
- Resident taxation
- Marginal ratesCore rule
- Franking credit benefit
- Offsets company tax paid
- Domestic non-resident WHT
- Often 30% on unfranked
- Treaty rates
- Often lower
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
InvestorsRetireesSMSF membersFoundersCross-border shareholders
Watch out for
- Franking is not a blanket 0% shareholder tax. Your marginal rate still decides whether extra top-up tax is due.
- Non-resident outcomes depend heavily on franked versus unfranked status and the relevant treaty.
- Dividend washing and franking integrity rules can deny credits if the holding fails the required tests.
- Foreign dividends received by Australian residents are often taxable with foreign income tax offset questions.
Frequently asked questions
How are dividends taxed in Australia?
Residents generally include dividends in taxable income at marginal rates. Franking credits can reduce the tax payable when the dividend is franked.
What is a franking credit?
A franking credit passes company tax already paid through to the shareholder so the same profit is not fully taxed again at both levels.
Do non-residents pay Australian dividend tax?
Often yes on unfranked dividends through withholding tax, commonly reduced by treaty. Franked dividends to non-residents are often exempt from Australian dividend WHT.