Just a question I had never thought about, because I used to mostly play with CFDs... But recently, I was wondering why this would not work:
1. Obtain a tax status so that your trading is treated as a business rather than an investment - i.e. you can claim capital losses as income losses.
2. Buy a share just prior to it paying a dividend.
3. Wait for it to pay the fully franked dividend. Usually when it pays a dividend, it falls by roughly what the dividend was.
4. Sell the share and claim it as a trading loss - For most of us that would be 42c
5. Declare the dividend as income - again at 42c, but less the 30c franking credit.
You in effect made no money, but you got just got 30c in tax back.
Is this a legitimate way to reduce tax? Am I missing something?