Franking credits and interest deductability

Discussion in 'Accounting & Tax' started by Wilko, 14th Mar, 2021.

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  1. Wilko

    Wilko Well-Known Member

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    Just wondering if someone could help me understand to tax outcome of what I'm planning to do.

    Say I borrow $100k at 3% interest and use the total amount to buy fully franked shares.

    I receive a fully franked dividend of $3150 with a franking credit of $1350

    So total dividend was $4500. I'm in the 37% tax bracket so I owe $1665 tax on the dividend minus the $1350 franking credit leaves me owing $315 in tax.

    Assuming that I've got the franking credit part right, how does the $3000 of deductable interest fit into this equation?

    Thanks

    Wilko
     
    Wilko, 14th Mar, 2021
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    deduct interest from the grossed up amount before working out tax.
     
    Terry_w, 14th Mar, 2021
    #2
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