Australian (ASX) Stock Market Forum

Dividend Payments/Tax

Joined
Apr 4, 2014
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Greetings..

I think I know the answer to this but I'll ask anyway.

If I get a dividend payment into my -investment platform- cash account, do they get added to my yearly income and therefore I need to pay tax on them?

Or is it a case that these dividends only qualify as income once they leave the investment cash account and enter my bank account? Because theoretically, I can't spend these dividends from my investment cash account so why should they be classified as income? Hence the slight confusion.

How about if the dividends are automatically re invested by the platform, do I then pay tax on these dividends? Again, I don't see the money it's re invested.


-Frank
 

Value Collector

Have courage, and be kind.
Joined
Jan 13, 2014
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Greetings..

I think I know the answer to this but I'll ask anyway.

If I get a dividend payment into my -investment platform- cash account, do they get added to my yearly income and therefore I need to pay tax on them?

Or is it a case that these dividends only qualify as income once they leave the investment cash account and enter my bank account? Because theoretically, I can't spend these dividends from my investment cash account so why should they be classified as income? Hence the slight confusion.

How about if the dividends are automatically re invested by the platform, do I then pay tax on these dividends? Again, I don't see the money it's re invested.


-Frank

Dividends will be taxed as income regardless of whether they are reinvested or spend.

However, a lot of dividends come with a franking credit (tax credit) of 30%, so if your effective tax rate is 30% or lower you may not end up owing any tax on them.

Let’s say you receive $7000 dividend that comes with a $3000 franking credit, the entire $10,000 is added to your taxable income.

However, you then receive a credit for tax already paid of the $3000 franking credit, as if you had already paid it.
 
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