Australian Investment Blog

The loss of over $5bn in Franking credits, should it scare investors?

Headlines have dominated the financial papers recently concerning the loss of over $5bn in franking credits e.g. "The loss of franking credits would be a travesty," the press loves to shock and I'm sure a few pensioners may have stumbled on their Weetbix reading this. Firstly, let's put everything into perspective and explain simply what is potentially going to happen:

The company Tax Rate is looking to fall from 30% to 28.5% in 2015-16.

This fall in the company tax rate is the equivalent to the loss of $5-7 billion in dividend franking credits.

However, this is only a loss of around 7% of the retained franking credits pool which currently stands at $75 billion.